A surge in new apartments will help inject much-needed supply into the housing market, but the construction industry warns home-building might continue to stagnate.
The number of dwellings that made it through planning regulations jumped by 20.6 per cent in May, defying expectations of a more restrained three per cent uptick.
But the monthly growth was driven by a 59.4 per cent boom in new apartment buildings, with detached homes – a more reliable indicator of home-building demand – lifting a weak 0.9 per cent.
Sluggish home-building has been hanging over the rental market, which is already experiencing a mismatch in supply and demand that has sent prices rocketing.
A shortage of homes entering the market will likely keep pressure on prices.
NAB market economist Taylor Nugent said it was difficult to read into the Australian Bureau of Statistics’ volatile apartment data, but the numbers suggested detached house-building might have found a floor.
But he expected the figures to remain subdued as borrowing costs were higher, construction costs unpredictable and pandemic-era stimulus had pulled forward some demand.
Master Builders Australia chief executive Denita Wawn welcomed the stronger construction numbers but warned of tough times ahead.
“We will need to see a sustained recovery in higher-density home-building volumes before the affordability crisis in our rental market starts to abate,” she said.
Ms Wawn said lending figures for new homes, released by the ABS in a separate dataset, signalled a further pullback in construction.
The number of loans for the segment eased 0.2 per cent in May.
The overall outlook for lending is more upbeat, with loan commitments for existing homes jumping in line with the recovery in Australian housing prices.
A 4.8 per cent rise was recorded in May, to $24.9 billion.
The value of new investor loan commitments rose 6.2 per cent, to $8.5 billion, whereas owner-occupier loan commitments rose four per cent, to $16.4 billion.
Oxford Economics Australia senior economist Maree Kilroy said national home loan commitments had recorded the strongest monthly lift since November 2021.
Loans for established dwellings rose 4.2 per cent over the month, which Ms Kilroy said was consistent with the rebound in housing prices.
National property values continued to shake off interest rate hikes and recorded another jump in June, lifting 1.1 per cent by CoreLogic’s measurements.
But Ms Kilroy said there had been signs of softening in property prices over recent weeks, with the pace of price growth slowing in June and auction clearance rates taking a step back.
“We are wary of price growth holding through the new financial year,” she said.
The CoreLogic data also revealed a slight pullback in the rate of growth across several cities, including Perth, Sydney and Brisbane.
(Australian Associated Press)