Building blues on the retreat

AFTER a long period of blues in the building and construction industry, it looks like the tide is turning for this important sector.

As repeated data over the last year showed a regular decline in approval numbers, it seems that the worst is behind us, with news coming in from the Australian Bureau of Statistics showing that the total number of dwellings approved rose 4.2 per cent over the month of October 2024, to a total of 15,500 dwellings.

Although approvals are still lagging behind where the industry would like, the increase has come as welcome news to many.

HIA economist Maurice Tapang said the most recent data showing there were 15,500 dwellings approved for construction nationally in October – the highest number of approvals in almost two years – was most welcome news for the industry.

“Total dwelling approvals have risen by 4.2 per cent compared to the previous month, which confirms the rise in home building activity expected in 2025,” he said.

“Detached house approvals in the three months to October 2024 have increased by 8.7 per cent compared to the same time in the previous year.

“It has been more than a year since the RBA last raised interest rates, and unchanged interest rate settings has provided some degree of certainty for consumers.”

This fresh information also reveals that many home owners are turning to renovation instead of new homes, hampering new builds somewhat.

Recent analysis from KPMG Australia shows that renovation spending has lifted by 6.5 per cent over the past five years, while new private residential construction dropped by 14 per cent when adjusted for inflation.

The analysis shows Victoria has emerged as the leader in one-for-one replacements, where existing homes are demolished and replaced with single new dwellings, accounting for 12.6 per cent of new residential construction.

Mr Tapang said if renovations were put aside, households were returning to new home building despite there being no cut to the cash rate.

“This is because unemployment remains at very low levels, while housing demand remains very strong.

“Prices of home building materials have also been growing at a more normal pace, the latest data showing a 1.4 per cent annual increase in September 2024.

“Low unemployment, unchanged interest rates, stable growth in materials prices and a return to normal build times are helping lift up the market from its recent trough.”

The ABS data also reveals that multi-unit approvals rose by 22.4 per cent in October to 6130.

This is welcome news as approvals for multi-units have been bumpy and trending at decade-low levels amid challenges with capacity.

Mr Tapang said multi-unit approvals in the three months to October were 15,750, which is 1.2 per cent higher compared to the same time in the previous year.

“Multi-units would need to pick up more strongly in order to achieve the Australian Government’s target of 1.2 million homes over five years,” he said.

HIA economist Maurice Tapang said the most recent data showing there were 15,500 dwellings approved for construction nationally in October was welcome news for the industry.