Would-be homebuyers hoping that cooling property markets will mean an end to affordability pressures, allowing them to finally crack the market, might be disappointed, new data suggests.
Australian Bureau of Statistics figures released on Tuesday revealed a continued slump in the number of new building approvals, with a 2.4% fall in April on the back of a 19.2% collapse in March.
The residential construction sector is in the midst of a crisis due to a perfect storm of factors, from the skyrocketing cost of materials to a severe labour shortage.
The Urban Development Institute of Australia said the decrease in building approvals will inevitably impact affordability.
“While the housing construction industry will likely be busy into next year as it works through the current backlog, concerted focus is needed from government to keep housing affordability in check,” Maxwell Shifman, UDIA national president, said.
Mr Shifman said building approval figures were a real-time indication of the health of the economy.
For example, despite a cooling of property markets in much of the country, demand from homebuyers remains strong and above pre-pandemic levels in many cases, he said.
As a result, without a short-term easing of construction costs, labour pressures and land supply shortages, the pipeline of new housing will decline over the coming year.
A slump in new building approvals means the crucial housing supply pipeline is at risk of running dry. Picture: Getty.
Mr Shifman said there will inevitably be upward pressure on home prices, especially as immigration rates return to normal.
The latest PropTrack Home Price Index showed a 0.11% fall nationally in house prices in May, marking the first decline since the start of the COVID-19 pandemic.
But Real Estate Institute of Australia president Hayden Groves said any affordability benefits from cooling property markets would likely be short-lived.
The National Housing Finance and Investment Corporation, a Commonwealth agency, has forecast a significant shortfall in the number of new homes needed to accommodate a growing population.
“NHFIC estimates household formation is across the board expected to exceed supply by 164,300 [dwellings] by 2024 to 2025,” Mr Groves said.
“This will maintain pressure on affordability, particularly as interest rates increase.”
Despite cooling property markets, homebuyer demand remains strong and above pre-pandemic levels. Picture: Getty
A business-as-usual approach to housing supply “cannot continue”, he said, calling on government and the property industry to find new solutions.
“We will need to unlock solutions to better utilise existing housing inventory, deal with the building and construction crisis so new homes can be built, and look globally to find innovative practices,” he said.
This could include a coordinated Taskforce of Australian Treasurers to kick off a conversation about stamp duty reform, as well as mandatory land releases and supply targets.
The building industry has urged the new federal government to ditch the business-as-usual approach to housing supply. Picture: Getty
Mr Shifman said fast-tracking an increase in skilled migration to help the construction sector meet current demand is another option.
“We can’t sit on our hands and wait, as the costs of doing so will far outweigh the benefits,” he said.
“Without swift action, all Australians will all be negatively impacted by higher cost of living and lower productivity in the near future.
“We encourage governments to work swiftly on addressing the skilled worker shortage, and to expedite work on new supply boosting measures, to alleviate key shortages now and into the future.”
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