New home price record as building approvals struggle

Scott Kuru December 3, 2024 4 min read

KEY POINTS

ABS data shows dwelling approvals rose in October 2024
Housing approvals and commencements are about a third below targets for Federal housing goals
National home prices marked 23 consecutive months of growth, with the median reaching $800,000, as per REA Group’s PropTrack

New figures from the Australian Bureau of Statistics show the number of dwellings approved to be built in October 2024 rose slightly, but still fell thousands of homes short of the federal government’s ambitious housing targets.

A major forecaster has also cast doubt on whether some of the residential apartment projects approved for construction will actually proceed.

At the same time, data analytics firm PropTrack says national home prices rose for the 23rd consecutive month in November 2024, with Australia’s median home value reaching $800,000 for the first time.

Building approvals

ABS-DEC

Data from the Bureau of Statistics shows the number of residential dwellings approved for construction rose 4.2% in October 2024 to 15,498.

The number of approvals is 6.1% higher than this time last year.

However, the number of houses approved actually fell 5.2% during the month to 9,191.

House approvals in the booming states of Queensland and Western Australia eased, falling 12.3% and 6.1%, respectively.

South Australia was the only major state to record a gain (+1%).

However, this softening picture for houses was offset by a big jump of 24.8% in apartment and townhouse projects (private sector dwellings excluding houses) to 5,859, with New South Wales and Victoria driving this outcome.

“While the latest approval result for apartments was positive, we continue to expect a materially higher dropout rate (than houses) to commencement,” says Maree Kilroy, Senior Economist and construction specialist at Oxford Economics Australia.

After factoring in “drop-outs” - approved projects that don’t end up getting built - Ms Kilroy now expects total dwelling commencements to gain 3% to 163,400 in the 2024-25 financial year.

Given the Federal government aims to build 1.2 million new homes in the 5 years between 1st July 2024 and 30th June 2029, that means, this financial year, Australia will fall about 77,000 homes (or 32%) short of the average annual target of 240,000 dwellings.

Although Maree Kilroy forecasts a “sharper uplift” in approvals and commencements in the 2025-26 financial year following expected interest rate cuts from mid-next year, she says that “utility connection bottlenecks and trade labour shortages will make a more aggressive recovery difficult.”

PropTrack Home Price Index

REA Group says its PropTrack Home Price Index for November 2024 shows national home prices rose 0.15% to a new record during the month, recording their 23rd straight month of growth.

The median Australian home price also reached $800,000 for the first time.

Twelve of the eighteen residential property markets PropTrack measures are also at record median price highs.

The new national benchmark of $800,000 is largely a function of expensive homes in Sydney (median price $1,112,000), Brisbane (median price $868,000), and Canberra (median price $843,000) dragging up the national median home price.

Significantly, median home prices in Melbourne ($792,000), Adelaide ($795,000), Perth ($778,000), Hobart ($682,000) and Darwin ($511,000) all lie below the national median, signalling the strong affordability of those markets.

PropTrack’s figures show Melbourne was the only capital city to see prices ease in November (down 0.07%), while Hobart was the strongest performer (up 0.43%).

Over the past year, Melbourne (-1.63%) and Regional Victoria (-2.09%) were the only markets to see price declines, with national median prices increasing by 5.53%.

“While housing demand has remained resilient to persistent affordability constraints, we have seen the pace of home price growth slow since earlier in the year,” says PropTrack Senior Economist Eleanor Creagh.

Ms Creagh says more homes for sale has helped slow the pace of price growth.

“The increase in properties hitting the market this year has been met with strong demand, but increased stock for sale has been a contributor to slowing price growth, along with affordability constraints and the sustained higher interest rate environment.”

Nevertheless, with expected interest rate cuts next year and a continuing housing shortage at a time of strong population growth, Eleanor Creagh seems optimistic about future home price growth.

“In the period ahead, home prices are expected to lift, though the pace is expected to remain softer, trailing the strong growth in prices over recent years,” she says.