Construction set for a slowdown in 2024 despite November lift in approvals

The construction industry looks set for a slowdown in 2024 despite a solid increase in building approvals nationally in November.

The latest data from the Australian Bureau of Statistics (ABS) reveals that the total number of dwellings approved nationally in November rose by a seasonally adjusted level of 1.6 per cent, adding to a 7.2 per cent lift in October.

The November data was buoyed by a 6.7 per cent surge in apartment approvals, which offset a 1.7 per cent decrease in house approvals.

The apartment approval increase came off the back off a 17.4 per cent spike in approvals in October.

However, Daniel Rossi, the head of construction statistics at the ABS, says that despite the latest monthly increase, total dwelling approvals are currently tracking lower than FY23.

“In original terms, 70,900 dwellings were approved between July and November in 2023, compared with 81,954 over the same period in 2022," Rossi says.

The Housing Industry Association (HIA) says the drop in approvals will have a knock-on effect to construction volumes in calendar 2024, making for a slow start to the federal government’s target of building 1.2 million homes over the next five years.

“The fall in this month’s figures sees approvals in the three months to November lower by 8 per cent compared to the same period in the previous year,” says HIA chief economist Tim Reardon.

“The low volume of building approvals throughout 2023 will see the volume of homes commencing construction continue to slow this year.”

Reardon notes that the latest data on new home sales and housing finance confirm his projected slowdown.

“A continued fall in the number of new homes approved indicates a slow start to the government’s ambition to build 1.2 million new homes in five years starting mid-2024,” he says.

“The rise in the cash rate is the primary cause of this slowdown in approvals.”

The ABS data shows that total dwelling approvals rose in just two states in November - Victoria (up 7.8 per cent) and South Australia (up 6 per cent).

Falls were recorded in Tasmania (down 22.6 per cent), Queensland (14.6 per cent), NSW (6.9 per cent) and Western Australia (5.5 per cent).

Approvals for houses were down in Western Australia, Victoria and Queensland, but up only marginally in South Australia (0.8 per cent) and NSW (0.6 per cent).

In seasonally adjusted trend terms, house approvals over the three months to November, compared to a year earlier, were down 16 per cent in NSW, 7.2 per cent in Victoria, 6.6 per cent in South Australia and 6 per cent in Queensland.

Western Australia saw a 5.4 per cent increase over the same period.