Latest housing approvals data has begun to show the impacts of the Iran war, and they’re grim news for the nation’s housing crisis. Picture: NewsWire / Martin Ollman
Rising interest rates and the war in Iran are starting to hit the number of new Aussie homes being approved.
It comes as the average cost of a new house hit an almost $525,000 record in April’s latest housing approvals data from the Australian Bureau of Statistics.
The grim combination as the nation continues to fall short of housing construction targets intended to remedy an affordability crisis, has emerged despite a number of edicts from the federal and state governments around the nation intended to promote new builds.
RELATED: Why Aussie small builders are refusing new apprentices
March home approvals plunge in fresh blow to Aussie housing crisis
$2.48 trillion Aus mortgage gamble revealed
In the latest Australian Bureau of Statistics data shows there were 17,307 homes approved nationwide in March, compared to 16,710 in April.
It’s a 3.4 per cent dip that was caused by reductions in both the number of houses being approved, down about 1 per cent to 10,215, and a more than 500 home decline in unit approvals at 6495.
The seasonally adjusted stats are four figures below the 19,345 approvals in February, when the War in Iran began, though a substantial increase from the 15,167 approvals in April last year.
On July 1, 2024, Prime Minister Anthony Albanese and Treasurer Jim Chalmers kicked off a plan to build 1.2 million homes in the span of five years as part of a National Housing Accord strategy to address the nation’s housing affordability crisis.
It works out to 240,000 homes a year or 20,000 a month, a figure the nation has still never reached.
Australia is still not building enough homes to reach its 1.2 million target more than 20 months after it started the five-year program.
Meanwhile, approval numbers contrasted with the value of the approvals around the nation show Australia’s average new build is now expected to cost $524,908.
At the same time a year ago the figure was just $502,184, and in July 2024 when the Accord commenced the typical build cost around the country was $461,064.
Home buyers are now effectively paying $60,000 more for a new build than they were when the five-year timeline commenced.
Property Council’s group executive policy and advocacy Matthew Kandelaars said April had seen “global volatility” and speculation over the contents of the then looming federal budget lead to a rise in “cost pressures” that had impacted the viability of some projects.
“Softer approvals reflect a more cautious investment environment, higher costs and greater uncertainty,” Mr Kandelaars said.
Housing construction is elevated from a year ago, but well below target levels.
However, he noted that there was a clear path the government could follow to address this issue and have more homes be built.
“Up to 40 per cent of the cost of every new home comes from taxes and charges across three tiers of government and this is the greatest single barrier to making new homes feasible and increasing supply,” Mr Kandelaars said.
“The housing targets are welcome and have turned focus to better approval processes, but the key now is fixing post-permit bottlenecks, including delays in last mile infrastructure and approvals, and getting tax and investment settings right.”
He added that with the federal budget’s changes to capital gains tax and negative gearing likely to have an impact on housing construction, the Albanese government would need “to have the courage to monitor the budget tax hikes and amend them to support the delivery of new homes if the secondary effects are worse than they expect”.
Both new house and unit approvals declined in April, the second month in a row home approvals dropped across Australia.
Oxford Economics Australia lead economist Maree Kilroy said it was worth noting there had been a 20 per cent increase in unit approvals in the past year, and more “waiting in the wings”.
However, she warned residential approvals and construction would likely be impacted by supply disruptions from the Iran conflict as well as interest rate hikes denting borrowing power for homebuyers.
And while the latest federal budget included incentives for investors who buy a new home, she warned any boost from that was “likely to be cancelled out by falling home prices” — which would make it harder to get the prices needed to cover building costs for new abodes.
Housing Industry Association senior economist Tom Devitt said the figures confirmed that the nation was still falling short of where it needed to be for housing.
“Australia is not expected to build enough homes to meet current and future demands,” Mr Devitt said.
Housing approvals are expected to take a hit as the war in Iran as well as interest rates and the latest federal budget have an impact in the coming months.
The economist also warned that rising interest rates, budget announcemtns and international turmoil would have a more pronounced impact on approvals later this year.
“Elevated population growth and government spending have kept both inflation and interest rates higher than they otherwise would be, even as households and private sector businesses remain constrained,” Mr Devitt said.
“Recent Budget changes will add to market uncertainty and disrupt the momentum that was evident in early this year.
“These issues magnify the importance of the role of governments to reduce the cost of delivering a new home to market.”
Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered direct to your inbox.
MORE: ‘Red alert’: 38,573 Vic landlords sound the alarm
Melbourne loses status as $1m-median property city
21k tradie shortage threatens to drive up home prices, rents, rates
English (US) · 