Good news for the housing supply now that apartments are getting the green light

The latest construction data shows that the number of apartment approvals has reached a record not seen in years.

According to the Australian Bureau of Statistics, the total number of homes approved for the month of September across Australia was 17,019, closer to the monthly benchmark the country needs to achieve for its housing targets.

While not yet quite reaching 20,000 – the minimum number the country would need to approve each month to reach the goal of creating 1.2 million new homes in five years – September’s figures were still seen as good news for housing advocates, who welcomed positive momentum in several categories.

Overall, the total number of homes approved increased by 12% in September, seasonally adjusted. This followed declines in July (of 8.2%) and August (-6%).

The upswing was driven by multi-dwelling structures such as apartment complexes, townhomes and semi-detached houses. This category saw a 26% increase in September with 7,219 homes approved during the month, which is 55.2% more than a year ago.

Apartments were the strongest contributor to this category and indeed drove much of the overall momentum during the month, with apartment approvals in September coming in 81.7% higher than in August in original terms. This is the highest number of apartments approved since December 2022.

House growth more cautious

Approvals for detached homes also supported the monthly increase, which rose 4% seasonally to 9,547 homes, following a 1% decline in August.

This means that the number of detached homes will be at approximately the same level as now in 2024.

Queensland was the only state to see a decline in detached house approvals, with private sector housing approvals falling 6.9%. The biggest increase was in New South Wales, with an increase of 7.8%, with Victoria also showing a healthy improvement at 7.3%.

Cuts in cash rates are fueling buyer interest

The Housing Industry Association (HIA) has attributed much of the momentum to the positivity generated by falling mortgage interest rates.

“The drop in cash rates and continued population growth ultimately feeds into an increase in building permits,” said Tom Devitt, HIA senior economist.

He noted that an increase in approvals in Sydney and Melbourne was particularly welcome, as Australia’s two largest cities were particularly happy to respond to cash rate adjustments.

“Recent new home sales data, and now approval data, suggests that this uptick in activity is finally becoming apparent in the two largest markets.

“In September, new home sales in New South Wales and Victoria rose by 34.4 per cent and 34.8 per cent respectively, and this should continue to feed into approvals data into the new year,” Devitt said.

But HIA also noted that lower interest rates alone cannot stimulate the growth needed to meet Australia’s housing targets, and urged lawmakers to continue focusing on supply-side issues such as helping maintain a healthy pipeline of land ready for shoveling.

Approvals increased in Sydney, where there was a slower response to changes in cash rates. Image: Getty

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Property Council policy and advocacy officer Matthew Kandelaars also noted that “one strong month alone is not enough to meet our welcome and ambitious housing targets”.

He urged lawmakers to continue to prioritize the speed of the approval process, noting that long delays in particular were causing volatility in apartment building approvals.

“The years it takes for some housing projects, especially large-scale apartments, to go through the approval processes puts a handbrake on supply,” he said.

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