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Australia’s largest capital cities have reported a rise in the number of approved but not yet commenced homes, with significant blame placed on the obstacles around higher-density development.
Recent findings from KPMG have shown that housing construction bottlenecks have resulted in 34,325 dwellings in Australia being recorded as “approved but not yet commenced” as of 30 June 2024, marking a rise of 8.3 per cent since one year prior.
While KPMG acknowledged that a lag between initial approval and construction commencing is a normal part of the building process, the firm emphasised that the above average number of dwellings at this phase indicates that systemic challenges are hindering developers’ pipelines.
New home construction has varied across the capital cities, with the number of approved but not yet commenced dwellings in Sydney increasing by 17.7 per cent since June 2023, while Melbourne, Brisbane and Adelaide have all seen decreases.
Sydney and Perth under pressure
Urban economist at KPMG, Terry Rawnsley, described development conditions in Sydney as “very tough” and noted that the “construction sector crunch in NSW has been more acute than any other state”.
Further analysis also revealed that 82 per cent of the stalled dwellings in Sydney are townhouses and apartments, casting a spotlight on the financial constraints that are particularly common around higher-density developments.
Rawnsley partly attributed NSW’s housing lag to the tripling of construction companies in the state which entered insolvency between 2022 and 2024.
The firm observed that Perth reported a significant jump in the number of stalled builds, recording 77.3 per cent more dwellings which were approved but not yet commenced compared to June 2023.
Despite this jump, Rawnsley noted that “these numbers are less surprising given the rapid growth in the number of approvals in Perth”.
“As the pipelines start rising, it is fairly normal that we would see this type of increase in ‘approved but not yet commenced’ dwellings, but we don’t want this number getting too high,” he said.
Promising results for Melbourne, Brisbane and Adelaide
KPMG reported that Melbourne’s market appears to have bottomed out at around the start of 2024, with the number of approved but not yet commenced dwellings dropping 21.3 per cent since June 2023.
This reduction was linked to a decline in townhouses and apartments in Melbourne, with the state’s 2,490 high-density builds as of June 2024 marking the lowest figure on record since March 2016.
According to Rawnsley, these figures show that the “pipeline of housing is drying up and more projects are being commenced by developers”.
Brisbane’s market was said to have displayed “promising” results, recording a 13.9 per cent reduction in the number of approved but not yet commenced dwellings even as the state’s number of approvals has started trending upwards.
“Brisbane has moved away from the more complex high-density market and focused more on detached housing. A detached house is an easier product to finance and get started than an apartment block,” Rawnsley said.
Even with an increasing number of stalled homes across the capital cities, the economist commented that he is “optimistic about the long-term outlook”.
“While the supply of new homes is much lower than we would want, strong population growth, construction costs stabilising, and approvals starting to trend upwards mean developers could be gaining more confidence to start housing projects,” he said.
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