Australia home approvals: RBA inflation fight smashing home building and tenants’ futures

News Corp Australia Network

Housing construction is expected to slump in the coming years, which will put growing pressure on already struggling tenants.

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Renters are facing a year’s long headache from Australia’s bid to beat inflation, after the nation’s pipeline of new homes slumped to its lowest level in a decade.

New Australian Bureau of Statistics figures show 7536 new houses were given the nod across the month, a 1238 (13.8 per cent) decline from December.

It was the fifth monthly drop in a row and the lowest figure since June 2012.

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Housing Industry Association senior economist Tom Devitt said the 2012 slump coincided with the last time the Reserve Bank of Australia “overshot” the mark on reining in inflation.

“And this will not be the end of the decline in approvals,” Mr Devitt said.

“If the RBA continues to raise rates, they do risk a longer and deeper slowdown in economic growth than is necessary in this cycle.”

In Victoria, the number of private sector houses given the green light slumped to 2570 — the lowest monthly number since 2557 were approved in October, 2019, and the second lowest since 2014.

Australia’s new home building industry boomed in 2021 as a result of government stimulus packages during the early days of the Covid-19 pandemic.

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With the pipeline of new home approvals falling – major builders are reporting as many as one in five new home buyers now abandoning their plans as a result of rate hikes, Mr Devitt said HIA now expected fewer than 100,000 new homes to be built in 2024 and 2025.

“The effect of the interest rates on the number of houses completed in 2024-2025 and beyond is a trough, and if that trough is very deep it will make the housing affordability issue even more significant,” Mr Devitt said.

With rental vacancy rates in every major capital below 2 per cent, and into the decimals in some cities, tenants will likely see their situation deteriorate in the next few years.

“At the moment it certainly does seem that the largest amount of pressure is in the rental market,” he said.

Tradies could also face a tough few years as demand for their services wains from 2024.

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Master Builders Association chief executive Denita Wawn said insufficient new land being made available for development and planning difficulties were impacting new home starts.

The MBA also cited that rental prices are increasing, having gone up 4.1 per cent in December and 4.8 per cent in January.

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