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The number of dwelling approvals fell 3.6 per cent in November, falling from a 22-month high the previous month, according to the ABS.
The total number of dwellings approved fell 3.6 per cent in November 2024 to 14,998, according to seasonally adjusted data from the national statistical agency, the Australian Bureau of Statistics (ABS).
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The number of dwellings approved fell across all residential building types including for private sector houses, which fell 1.7 per cent to 9,028.
Private sector dwellings, excluding houses, fell 10.8 per cent to 5,285.
The value of total residential buildings fell 0.5 per cent, to $8.36 billion, while non-residential building values rose 18.4 per cent, to $5.96 billion.
The decline in approvals over November contrasts with October figures, when the number of dwellings approved hit a near two-year high after rising 5.2 per cent.
However, despite the monthly drop, approvals remained 3.2 per cent higher than November 2023.
What’s behind falling approvals?
The overall drop was driven by lower approvals for both homes and apartments in November. Approvals for homes fell 2.2 per cent, while apartments dropped 5.6 per cent to reverse two consecutive months of growth.
Dwelling approval rates were mixed across states.
In Western Australia, approvals rose 18.1 per cent and in Queensland, they jumped 7.3 per cent.
However, approvals dropped 12.9 per cent in Victoria, 9.9 per cent in NSW, 4.2 per cent in Tasmania, and 1.6 per cent in South Australia.
Approvals for private sector houses fell across most states: down 4 per cent in NSW, 3.9 per cent in Victoria, 2.1 per cent in Western Australia, and 1.3 per cent in South Australia.
Queensland was the only state where approvals for houses rose in November up 4.3 per cent.
Encouraging signs of improvement
Despite declines in November, Matt King – the senior economist at the national building association, the Housing Institute of Australia (HIA) – believes there are signs of an encouraging trend emerging.
“Following a period of prolonged weakness, there are signs of life again in building approvals, which is pointing to a nascent recovery in new home building,” he said.
“November 2024 marked exactly one year since the RBA last raised interest rates. Unchanged interest rate settings have provided a welcomed degree of certainty for consumers.
“Population growth rates have slowed across the country but remain elevated which is contributing to strong underlying demand for housing. Detached house approvals continue to rebound off a very low base, further confirming that the trough of the cycle is now in the rear-view mirror.”
Looking ahead, the Commonwealth Bank of Australia (CBA) said building approvals are likely to improve with cash rate cuts.
“The number of dwellings being approved clearly remains well below what is required to ease the housing shortage and meet government targets. But recent progress has been encouraging, albeit slow,” it said.
“We expect lower interest rates in 2025 to stimulate more building activity. A more benign environment for developers in terms of material and labour cost increases should also incentivise larger projects as viability becomes more favourable, a positive sign for multi-unit approvals.”
However, the major lender said that housing targets may remain elusive.
“We expect a shallow easing cycle however which means hitting government targets in the near term remains unlikely assuming no other major policy changes,” it said.
But economist My Bui from financial services group, AMP, believes the housing shortage is set to continue.
“Throughout 2024, building approvals have trended up, similar to the trajectory of new home sales, which reflected stronger market confidence in a year of no rate hikes and a slower pace in dwelling construction inflation (but the level of construction costs remained high),” Bui said.
“However, 1) the increase in approvals is from a very low base in 2023, 2) unit approvals count is only half of the level seen in 2015-2019, 3) the accumulated undersupply of housing in Australia is at least 200k dwellings on our estimates, and 4) there remains a gap between building completions and approvals (due to delayed or abandoned construction projects).
“Therefore, we continue to see the housing shortfall to continue throughout this financial year, which will put a floor on house price depreciation in the first few months 2025 before the RBA starts cutting.”
Housing supply under the spotlight
The affordability and undersupply of housing are major issues expected to be addressed in the impending federal election. The Australian Greens and members of the Coalition have outlined what steps they would take to improve housing affordability should they gain power following this year’s election.
Meanwhile, the Albanese government has passed a range of measures to boost housing supply and affordability in recent months, including the Help to Buy scheme and the Build to Rent Bill.
Both Domain and CoreLogic outlined in their predictions for 2025 that affordability constraints and housing supply levels will have a major impact on house prices and the wider property market.
[Related: Dwelling approvals hit 22-month high]
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