On Friday, the Australian Bureau of Statistics (ABS) released housing finance data, which showed that the number of loans issued for the purchase or construction of new homes declined by 9.7% in July 2023, to its lowest level in 15 years:
“This is the weakest monthly performance since the Global Financial Crisis and leaves the three months to July 31.7% below the same quarter last year”, noted Housing Industry Association (HIA) senior economist, Tom Devitt.
Devitt also warned that Australia is facing a “decade-low” trough in new home construction:
“The previous year of interest rate increases from the RBA has compounded the surge in construction costs during the pandemic, drying up the pipeline of new homes awaiting construction around Australia”.
“This has all but guaranteed a decade-low trough in detached house commencements for the coming year”.
Devitt also warned that when the recovery does arrive, it is likely to be hamstrung by the poorest affordability in decades.
“The recovery will, unfortunately, be limited by the deterioration in housing affordability which will only exacerbate the housing crisis across Australia”.
“Purchasing a home is the least affordable it has been since just before the GFC, 15 years ago”.
“This deterioration in affordability will act as a handbrake on any recovery in home building”.
The HIA’s warning comes as separate ABS data released last week showed that dwelling approvals have collapsed to decade lows, signalling a future slowdown in new home construction:
HIA’s latest new home sales series is also tracking around one-third lower than the same time last year:
As a result, all of the major leading indications point to lower levels of home construction in the coming years.
In turn, the National Cabinet’s announcement that it will construct 1.2 million homes over five years is clearly founded on sand.
Australia has only built more than 220,000 houses in a single year once (223,000 in 2017).
So, building 240,000 homes for five years in a row in an environment of high material and financing costs and workforce shortages is a pipe dream.
The solution to Australia’s housing shortage is simple: limit net overseas migration to a level compatible with the nation’s ability to build new housing and infrastructure, as well as its environmental carrying capacity.
Stop exacerbating the problem by running one of the world’s most aggressive immigration programs.
