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The Australian Bureau of Statistics (ABS) has unveiled a comprehensive snapshot of economic indicators this week, painting a troubling picture for the nation’s housing landscape says Master Builders Australia CEO Denita Wawn.
With the release of data on inflation, building approvals, lending indicators, and building materials prices, it’s evident that the trajectory is veering off course, exacerbating the existing housing crisis.
Renters, mortgage holders, and builders alike find themselves ensnared in a tightening grip as these vital metrics spiral in unfavourable directions.
Producer price index
Having stabilised during the September 2023 quarter, there were hopes that building materials costs might have fallen during the December 2023 quarter.
The 0.3 per cent increase which occurred during the last three months of 2023 is an unwelcome result and means that building materials are over one third more expensive (+33.5 per cent) than before the pandemic.
Over the past year, costs pressures have been particularly acute when it comes to bricks (+13.5 per cent), paint (+11.6 per cent), sand (+11.0 per cent) and plaster products (+9.9 per cent).
Combined with continued labour supply pressures, the resumption of building materials price rises is likely to frustrate efforts to expand the stock of new homes.
December building approvals
Higher-density approvals have dropped to an 8-month low amid persistent rental pressures.
Falling by 22.4 percent during December 2023, overall building approvals saw a total reduction of 9.5 per cent over the month.
The deteriorating pipeline of higher density homes dragged down the overall number of new home building approvals which dropped by 9.5 per cent.
Compared with a year ago, the volume of new unit and apartment approvals is now 44.8 per cent lower.
Inflation
Latest inflation figures show, rental price pressures remain significant. This is the result of a prolonged phase of underbuilding on the higher density side of the market – a problem which predates the pandemic.
Right now, we are seeing the volume of approvals in this part of the market shrinking back from already minimal levels.
This is the last thing we need at a time when the gulf between supply and demand is so huge. Urgent action is required right across the board to increase the flow of new homes onto our rental market.
Bad outcomes in the rental market don’t just hurt renters. They also damage our economy’s ability to grow by restricting the number of new workers we can accommodate and placing upward pressure on wages.
Lending indicators
2023 saw home lending for new home construction hit a record low since data started being recorded in 2003.
During December, there was a 5.6 per cent reduction in the total value of housing loans to owner occupiers while investor lending fell by 1.3 per cent.
Poor sentiment amongst owner occupiers resulted in the number of loans for newly built homes declining by 4.9 per cent while existing home loans suffered an 8.2 per cent reduction.
The figures for December highlight the fact that the demand side of the new home building market is struggling at the same time as obstacles on the supply side persist.
The pipeline for new homes is shrinking and not showing assurances that people are able to build new homes.
To hit the 1.2 million homes target the volume of new home lending needs to be significantly higher.
The weak set of lending figures adds further to the case for the RBA to start reducing interest rates as soon as possible.
Decisive action needed
Master Builders acknowledges that Governments at all levels are starting to make inroads, and this will take time to flow through the market but more needs to be done to speed up the delivery of new homes.
Tradies remain deeply concerned with the impact the Federal Government’s Closing Loopholes Bill currently before the parliament will have on the sector and the housing crisis more broadly.
We are not building enough homes and when we do – they take too long to build and are too expensive. With these changes, it would only get worse. Everyone pays a price when there are fewer tradie businesses and higher costs for builders.
Media contact: Dee Zegarac, National Director, Media & Public Affairs
0400 493 071 | dee.zegarac@masterbuilders.com.au