Building approvals have slumped to the lowest level in more than a decade in evidence that the weak supply of new homes is set to persist through 2024, providing little relief for aspiring homebuyers and renters.
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The number of dwellings approved fell 9.5 per cent in December to just 13,085, largely driven by a 25.3 per cent plunge in approvals for apartments and units, which is a volatile segment of the market.
The result underlines concerns that the supply of new housing is falling far short of demand, helping to force up rents and the cost of established homes.
Commonwealth Bank economist Stephen Wu said just 162,000 homes were approved for construction last year, the smallest number since 2012, when the population was 3.7 million smaller.
Mr Wu said approvals in 2023 were down more than 15 per cent from the previous year and almost 30 per cent below the level reached in 2021.
Such weak numbers did not bode well for the year ahead, he warned.
"Unusually, in this cycle the pandemic boom in approvals has not yet translated into a material rise in completions and more supply coming online," the CBA economist said.
"This has contributed to the housing shortage Australia currently faces amid strong population [growth]."
Mr Wu said the possibility of interest rate cuts later this year could encourage a lift in approvals but, "even so, this process operates with a lag and so we still expect 2024 to be another weak year".
The prospect of little relief for the nation's housing shortage comes as debate intensifies about whether the government should increase its tax reform ambition and overhaul capital gains tax and negative gearing arrangements.
Independent MP Allegra Spender told the National Press Club on Wednesday that "everything has to be on the table".
"Capital gains tax and super tax concessions, stamp duty and land taxes, the GST, company tax thresholds, resource rent taxes, payroll taxes and fuel taxes, just to name a few," Ms Spender said.
Opposition leader Peter Dutton said the fact that Labor had ditched its commitment to the original stage three tax cuts in favour of a revised package should make people wary about whether it also plans to revisit changes to negative gearing and capital gains tax concessions.
But Treasurer Jim Chalmers has said the government is not contemplating or considering further tax changes.
Chief investment officer at investment firm The Motely Fool, Scott Phillips, however, thinks it should.
Mr Phillips urged an end to negative gearing and the axing of the 50 per cent capital gains tax discount to help improve housing affordability.
But he warned such changes, while necessary, would "only be tinkering".
"We should do those things but it won't change the fundamental issue," Mr Phillips said. "The only sensible policy is to ensure, through regulatory and legislative action, that we have vacancy rates high enough to let pricing settle at a more appropriate level."
Mr Phillips said this would involve both boosting supply as well as constraining demand by slowing the nation's population growth, even though he is a strong proponent of immigration and multiculturalism.
But Mr Wu said a large pipeline of housing work ready to be done had accumulated.
He said this would not only support the construction industry through the current economic slowdown but "mean more housing supply continues to come online".
The CBA economist admitted, however, that it was likely to appear "in a trickle than a flood".