Australia’s housing industry saw a sharp decline in the number of construction approvals in July amid soaring construction costs and rising interest rates.
According to Australian Bureau of Statistics (ABS), the total number of construction approvals across the country fell 17.2% in July, compared to a modest 0.6% decline in June.
The sharp drop was driven by a lack of approvals for apartments and units, with the number of non-residential units approved for the private sector falling by 43.5%.
ABS head of construction statistics Daniel Rossi said the above figure was the lowest level since January 2012.
On the other hand, there was a slight increase of 0.7% in house approvals.
The drop in total housing approvals in July was well above market expectations, with ANZ Research analysts Brian Martin and Daniel Hynes predicting a 10% decline for the month.
In addition, St George’s economist Jameson Coombs said successive interest rate hikes and high material costs were likely to dampen demand for new housing.
Western Australia saw the largest decline in housing approvals among jurisdictions at 36.9%, followed by Victoria at 17.4% and New South Wales at 16.2%.
While Tasmania and Queensland also saw sizable declines, South Australia reported a 19.2% increase in housing approvals.
Meanwhile, the total value of approved buildings fell 12.9% in July from a 6.2% decline in June.
Reforms to the National Building Code
The decline in building approvals came after the Australian government announced changes to the National Building Code, which included habitable dwelling provisions, new residential efficiency standards and condensation mitigation measures.
The Federal Government has said the reforms will ensure that new homes in Australia are more comfortable, livable, accessible and energy efficient.
“These are historic reforms to improve housing efficiency and accessibility for older Australians and people with disabilities,” said the Minister for Industry and Science. Ed Husic said.
“We’re helping Australians live in new homes that are more comfortable, more sustainable and more mobility-friendly.”
The minister also announced new national minimum standards for residential energy efficiency, requiring new homes and apartments to meet a seven-star rating, up from the previous six stars.
The new changes will make it more expensive for Australians to build their homes, Master Builders Queensland, an industry leading body, predicting that homeowners will have to pay an extra $30,000 (around US$20,600) on average.
By comparison, government modeling suggested that the new changes would increase construction costs by $6,000.
“It’s the first time buyers who are the most affected, who struggle to put together a down payment, make the repayments, and then the cost of construction goes up,” Master Builders CEO Paul Bidwell said as reported by ABC.