Despite a deepening national housing crisis, lagging housing construction has seen 37,074 dwellings in Australia remain 'approved but not yet commenced'. The latest analysis from KPMG Australia shows almost half of the approved but not yet commenced dwellings are accounted for by Sydney (30%) and Melbourne (18%).
The data for December 2023 shows the glut of ‘not yet commenced housing’ is 8% higher in Sydney and 11% higher in Melbourne compared to the five-year December average. KPMG Urban Economist, Terry Rawnsley explains: “There is always a lag between housing being approved and construction commencing, but current estimates show an abnormal number of dwellings sitting in this category, suggesting other market factors are stalling the pipeline of new builds.”
Almost 80% of the stalled dwellings in Sydney and Melbourne were townhouses and apartments. Increased construction costs have hindered the commencement of many higher-density projects, and increases in interest rates are impacting buyers' purchasing power. The last two quarters in Sydney have been particularly challenging. The most recent quarter have seen more than 11,000 dwellings approved but not yet commenced. With the pool of newly approved dwellings falling, one might expect the pool of not yet commenced dwellings to be falling too, but it remained steady.
Melbourne’s December result of 6,840 dwellings was the second highest over the past five years. “Putting aside the holiday season blip, Melbourne’s higher-density developments are still facing challenges in making them financially viable,” said Rawnsley.
Brisbane (2,610 dwellings) also saw an 8% increase over the five-year trend. Brisbane bucked the trend with the increase in approved but not yet commenced dwellings being driven by detached housing rather than townhouses and apartments. A strong housing market in Perth saw the December figures 9% below the five-year trend. The West Australian capital has been sheltered from some of the challenges facing the east coast market.
The number of approved but not yet commenced in the Rest of Australia in December 2023 was almost 20% higher, driven by a record number of dwellings in the ACT (1,772) being approved but not yet commenced.This is 63.5% higher than the ACT the five-year December trend. The Rest of NSW has been trending upwards over the past five years and is almost 20% higher than the five-year trend for December. This highlights that the challenges in the construction sector are not confined to the major capital cities.
