A decrease in the number of building permits being issued, hitting a ten-year low, is anticipated to lead to a surge in rental costs.

When immigration levels revert to more normal levels, the record low building approvals in January increased the possibility of more rental increases.

As buyers withdrew from the market in response to rising loan rates and skyrocketing building costs, the number of standalone home approvals fell by 13.5% in January compared to December to a seasonally adjusted 7664, the lowest monthly total since June 2012.

The lower result brought total new approvals down nearly 28% in January to 12,065, the lowest number since July 2012. This was coupled with a 44% decline in approvals of attached housing, which includes flats, townhouses, and semi-detached dwellings.

The supply of apartments has already shrunk significantly, and the scarcity of new attached dwellings is not anticipated to improve until late 2025, driving up rates.

The pipeline of houses, however, is also expected to decline, according to the most recent official figures. This is in line with industry body warnings that the new supply will decline once the current wave of construction—which has been prolonged by earlier weather- and shortage-related delays—is finished.

“Recent messaging from the Reserve Bank of Australia points to further interest rate hikes in coming months that will likely push the cash rate above 4 per cent, which will weigh further on demand for new dwellings,” said BIS Oxford Economics senior economist Maree Kilroy.

Ms Kilroy said recent buyers of house-and-land packages were struggling in the face of higher borrowing costs.

“For households that put down deposits on land lots over 2021 and 2022, finance at settlement has become challenging,” she said.

“Financing the build stage has similarly become tougher, where higher borrowing costs and a near 30 per cent run-up in construction costs since the start of the pandemic are both impacting.”

To learn more about the impact of soaring cost of living on the real estate market, book a meeting or contact our team of experts at 0481611220

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