May 29th 2024.
New research has uncovered that almost 40,000 homes in Australia have yet to begin construction despite being given building approvals. According to KPMG Australia, Sydney and Melbourne make up nearly half of these stalled projects, including apartments, townhouses, and houses. Experts attribute this construction lag to the high costs of building materials and recent interest rate spikes.
In Sydney, over 11,000 dwellings with approval have yet to break ground as of last December. Similarly, Melbourne has 6,840 stalled projects. Compared to the five-year December average, Sydney has seen a 7.7% increase in stalled housing while Melbourne has experienced an 11% spike. Urban economist Terry Rawnsley from KPMG explains that a majority of these projects are apartments and townhouses, and the abnormal number of stalled projects suggests other market factors are at play.
Rawnsley also notes that the rising costs of materials and finance are making it challenging for developers to build larger projects profitably. Additionally, potential buyers' purchasing power has been impacted by interest rate increases. Brisbane has seen an 8% increase in stalled housing, while the Australian Capital Territory has set a record for approved but not yet commenced dwellings, nearly doubling from 864 to 1,772. On the other hand, Adelaide and Perth have remained relatively stable.
The pandemic has also taken a toll on the construction industry, with a long list of businesses entering administration or collapsing entirely. Just this week, Stevens Construction, a prominent company in New South Wales that has completed hundreds of millions of dollars worth of building projects, has entered voluntary administration. These latest findings from KPMG highlight the challenges facing the Australian housing market and the construction industry, with many projects facing delays and uncertainty.
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