Building approvals decline further in January 2024, HIA reports

The Housing Industry Association (HIA) has highlighted a continuing downward trend in building approvals into the early part of 2024, with national approvals dropping an additional 1.0 per cent in January. HIA Chief Economist, Tim Reardon, stated, “Approvals have been declining since the first increase in the cash rate in mid-2022, and this trend appears to be continuing into the start of 2024.” This announcement followed the Australian Bureau of Statistics’ release of its monthly building approvals data for January 2024, which included figures for both detached houses and multi-units across all states and territories.

Reardon elaborated on the data, pointing out a significant 9.6 per cent fall in detached home building approvals for the month of January 2024. He added, “This decline leaves approvals 5.3 per cent lower in the three-month period to January compared to the previous year.” In contrast, multi-unit approvals saw a 14.5 per cent increase in January from very low volumes in the preceding month, despite a 15.4 per cent decrease over the three-month period to January, compared to the previous year.

The HIA has linked the overall decline in building approvals to the rise in the cash rate, noting it as the primary cause for the observed slowdown. According to the HIA, the effects of the cash rate increase have impacted all jurisdictions, though the impact varies with areas having higher land costs feeling more of the brunt.

Despite the generally negative trend, Western Australia experienced a surge in dwelling approvals, with a 26.4 per cent increase in the three months to January, compared to the previous year. Other regions weren’t as fortunate, with Tasmania leading the decline at -29.8 per cent, followed by the Northern Territory (-26.0 per cent), New South Wales (-17.6 per cent), South Australia (-13.4 per cent), Victoria (-12.2 per cent), Queensland (-10.0 per cent), and the Australian Capital Territory (-3.9 per cent).

Reardon concluded by highlighting the resulting slowdown in the commencement of home constructions throughout 2023 due to the low volume of building approvals, underscoring the adverse effects of rising cash rates on the housing market.