Starts Drop as Construction Glut Washes Through

Australia’s number of homes under construction has swelled to record highs, but new data from the Australian Bureau of Statistics reveals commencement figures have dropped dramatically.

The 21.2 per cent year-on-year decline was led by a fall in private sector apartment developments, which fell 5.2 per cent to 15,618 homes in the September quarter after a 4.5 per cent drop in the previous quarter. 

House commencements fell 4.9 per cent across the quarter, but still own the lion’s share of the market with 28,895 commencements. 

Urban Taskforce chief executive Tom Forrest said the latest data showed the New South Wales planning system was failing to address housing supply and affordability issues with ongoing low levels of home completions and commencements. 

Forrest said the state was lagging its southern counterparts with Victoria chalking up 14,094 commencements compared to 12,490 in New South Wales. 

“This poor end to 2022 on the ‘new starts’ data is bad news for hopes of a recovery in housing supply,” Forrest said.

“Just last week, ABS data showed that new housing and apartment approvals had been chronically low since 2019. It should be of no surprise to anyone that this has resulted in a crisis in housing supply.”

Forrest said the biggest indicator of the crisis was the rental supply crippling the state. He has called on the state government and opposition to commit to strategies to tackle planning issues at the coal face ahead of the election in March. 

HIA deputy managing director Jocelyn Martin said the strong building activity figures had helped alleviate the threat of a recession in Australia, but the federal government needed to address its migration policies.

“Today’s building activity figures confirm the market is still strong but will start trending downwards in 2023,” Martin said.

“During the past two years the industry has had a roller coaster ride along with the rest of the economy. From activity stalling at the start of the pandemic, to the biggest boom on record, building activity is set to contract again during 2023 due to the rapid increase in interest rates.

“A return to stable population growth, with a focus on attracting skilled workers creates economic growth and can facilitate an improvement in productivity and participation across the economy.”

The total number of homes hit a record high of 244,479 in the September quarter, the highest rate since December 2021. It was led by private sector new houses, with 103,124 new homes under construction in September 2022, as builders digest the glut of Homebuilder stimulus work.