New home starts fall to lowest level since 2012 as borrowers, industry crunched

New home starts have plunged to the lowest level in more than a decade, as constrained conditions in the building industry and elevated interest rates crunch the construction of new housing.

Work commenced on just 163,836 new homes during 2023, down 6.4 per cent on the year prior, the Australian Bureau of Statistics said on Wednesday, according to the seasonally adjusted figures.

Last year’s result was the lowest annual reading since 2012, and is far short of the surge in Australia’s population, which vaulted by 620,489 over the same period.

The annual reading was driven sharply lower by a decline in detached housing starts, which plunged 14.9 per cent on 2022 levels, to 98,629, its lowest annual reading since 2013.

Separate data released by the Bureau earlier this week showed building approvals, a leading indicator of Australia’s residential construction pipeline, was also sluggish through February.

Just 162,751 permits for new homes were issued in the 12 months to February – similarly its lowest annual result in more than a decade.

The anaemic reading for new housing permits is especially pressing given that from July 1, the government’s target to build 1.2 million “well-located” homes over five years begins, requiring the construction of 240,000 homes per year.

Fresh forecasts released on Monday by construction industry peak, Master Builders Australia, show that the government’s target is set to be missed.

Over the five-year period, the forecasts show 1,087,325 new home starts, however it is expected that not all of these dwellings would meet the “well-located” requirement.

While Labor remains confident its target can be met as construction activity rebounds, the forecasts show only financial year 2027-28 will hit the annualised rate required to meet the target.

More to come.