Home building approvals dropped 6% across Australia in October, however HIA says this year’s consecutive cash rate rises were yet to impact building approvals. 

“The result was driven by private sector dwellings excluding houses, which decreased 11.3%,” said Daniel Rossi, Director of Construction Statistics at the Australian Bureau of Statistics (ABS). 

“Approvals for private sector houses fell 2.2%.”  

HIA Economist Tom Devitt said that despite the decline in approvals in recent months, they were yet to reflect the adverse impact of the rate rises that commenced in May 2022. 

“Building approvals have been sustained in recent months by the record number of home sales prior to the first increase in the cash rate that still haven’t been approved, much less commenced construction,” Devitt said.  

“Sales in and financing of new homes have fallen significantly in recent months, but this is yet to flow through to the number of homes gaining council approval. 

“The full impact of the rate rise will not be observed in approvals data until 2023 when the pool of earlier sales is exhausted.” 

Detached housing building approvals declined by 2.4% during the month, compared to the previous month, leaving them 11.8% lower for the three months to October 2021.  

Multi-unit approvals also declined in the month of October, down by 11.4%.  

“Affordability constraints in the detached market, combined with tight rental markets and returning overseas migrants, students and tourists, are set to support demand for more affordable, higher density living,” Devitt said.   

“This means the multi-units market is set to continue strengthening in the face of higher interest rates and a cooling detached market.  

Devitt said a large pipeline of home building work was sustaining employment across Australia and continued to obscure the impact of rising interest rates on demand for housing.  

“The 2.75% increase in the cash rate will bring this pandemic boom to an end, but this is yet to be reflected in approvals data,” Devitt said.