Leading economist says approvals improving but remain well short of what's needed
Australia's building approvals remain short of the volume needed to close the country's deepening housing supply shortage, according to Cameron Kusher (pictured), chief economist at Australia’s largest property valuation firm Herron Todd White.
"Although approvals have strengthened compared to a year ago, the reality is that current approval levels remain insufficient to meet Australia's housing needs or the government's long-term housing targets," Kusher said in an interview with MPA.
Per data released earlier this week, private sector house approvals fell 1% in April but remained 7% higher than a year ago. Queensland recorded its highest level of house approvals since August 2021, with Victoria and South Australia also posting gains.
Approvals for apartments and other higher-density dwellings told a different story, falling 3.6% over the month – though they remain 20.5% higher than a year earlier.
Kusher said the contrast between the two segments reflects a structural imbalance that policy alone will struggle to fix quickly.
"The detached housing market is the backbone of supply, seeing stronger demand and faster delivery once commenced – which is essential given our strong population growth and tight housing market conditions," he said. "However, higher-density housing approvals remain volatile and continue to face significant feasibility challenges."
The value of total building approvals rose 10.2% in April, driven by a rebound in non-residential building approvals, while residential building values were broadly unchanged.
Policy direction a coin toss
Kusher expressed uncertainty over whether Federal Budget measures and legislative initiatives – including support for first-home buyers, planning reform, and incentives for new construction – will be sufficient to materially lift housing delivery.
"Whilst the aim of these policies is to funnel new investment into new supply, the higher cost of new housing relative to existing housing remains a key challenge in the success of these policies,” he said.
Kusher warned that the structural barriers confronting the sector run deeper than any single policy package can address in the near term.
"The barriers facing the housing sector extend beyond demand and financing. Construction costs remain elevated, labour shortages persist, and feasibility remains challenging for many higher-density projects, particularly in major capital cities.”
Kusher also flagged the risk that approvals growth could stall at precisely the wrong moment, with higher interest rates, weakening housing sentiment, and renewed construction cost pressures potentially combining to slow activity just as the pipeline needs to accelerate.
"Even if approvals defy expectations and continue to rise, it will take several years for additional housing stock to be delivered and materially improve affordability outcomes and ease pressure in rental markets," he said.
"Australia remains a long way from resolving its housing supply shortage. The policy direction may help to facilitate more supply, but interest rates, buyer confidence, and the cost of new housing are the key headwinds."
