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  • Writer's pictureFlow Australia

Better month for home approvals but new building soft

The outlook for new home building is looking lacklustre as delays, high costs and interest rate hikes make it difficult to get new projects off the ground.

The number of new dwellings approved by local governments picked up last month though home building generally remains sluggish.

Dwelling approvals lifted 7.5 per cent in October, according to the Australian Bureau of Statistics, which followed a four per cent decline in September. 

A 19.5 per cent increase in new apartments and non-house approvals was recorded over the month, with houses lifting 2.2 per cent.

ABS head of construction statistics Daniel Rossi said there were fewer dwellings being approved than was normal, despite the uptick over the month.

"In original terms, 55,029 dwellings were approved between July and October in 2023, compared with 65,599 over the same period in 2022."

Domain is forecasting national house prices to rise by five to seven per cent in 2024.

Oxford Economics Australia head of property and building forecasting Timothy Hibbert said delays, high costs and interest rate hikes were making it difficult to get new projects off the ground. 

"With dwelling approvals running at this rate and strong population growth playing through, a sustained mismatch between demand and supply for housing will persist for a number of years," Mr Hibbert said. 

A separate report on Australia's real estate market from Domain flagged population growth, slowing housing supply and a possible reduction in the mortgage serviceability buffer as likely drivers of home price growth in 2024. 

Working in the other direction is stretched affordability, an expected uptick in unemployment and the threat of lingering inflation that could keep interest rates higher for longer, weighing on affordability and purchasing power. 

The real estate marketplace has national house prices rising by five to seven per cent in 2024. Units are likely to grow by a more modest two-four per cent.

Domain chief of research and economics Nicola Powell said the recovery in the property market throughout 2023 was a surprise given interest rates were going up. 

"In 2024, we anticipate continued growth in house and unit prices, with some buyers, sellers, and renters proactively adapting to the lingering impact of the 2023 market movements and potential changes in the coming year," Dr Powell said.

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