The rise in residential building approvals is welcome news, but many challenges remain for the construction industry and housing supply in Australia.
New dwelling approvals rose by 4.4% in September, pointing to a modest turnaround in the home building outlook. However, the 14,842 new dwellings approved in the month remains very subdued relative to Australia's historical standards.
Approvals for units – which are critical to delivering well-located and affordable housing – remain below long-term performance. 4,653 new private sector units were approved in September; a decade ago the monthly figure was routinely in the eight to ten thousand range.
"Australia is simply not building enough housing to meet our needs," Innes Willox, Chief Executive of the national employer association Australian Industry Group said.
"In the June quarter, 45,000 new dwellings were completed, and that is well below the approximately 60,000 required to meet the goals set by the Commonwealth and states in the 2023 National Housing Accord.
"Growing building approvals is just the first step – unless the construction industry is ready to deliver, all this increase does is add to the $77 billion of residential building work sitting in the pipeline.
"Unfortunately, the workforce and cost pressure on construction shows much still stands in the way of meeting our housing targets," Mr Willox said.
There were 25,000 construction jobs vacant in August and 59% of employers report they have trouble filling these roles. Jobs and Skills Australia has confirmed every construction trades occupation is already in national shortage.
Cost inflation adds certain pressure – house building input prices have increased by 34% since 2020, nearly twice as fast as the 19% increase in consumer prices in the same period.
"These cost pressures are bad for our builders and everyday Australians trying to access the housing market. Weaker builder margins have led insolvencies seen across the industry; while raising the cost of building a new home," Mr Willox said.
"Raising new approvals is a good first step, but we need to take a systematic look at the construction industry's challenges if we are to build enough to meet our housing needs."
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