New building activity slows as rates bite

New home building starts have plummeted by more than 20 per cent in 12 months as labour and material shortages continue to weigh on the construction industry.

New building activity fell further in the September quarter after softening moderately in the three months to June.

Total dwelling starts fell 5.2 per cent in the September quarter, fresh Australian Bureau of Statistics data reveals, following a 2.7 per cent decline in the June quarter.

Construction work on new private sector houses fell 4.9 per cent, with new work on other medium and high-density building types falling 5.2 per cent.

Compared to September 2021, new construction activity is down more than 20 per cent.

But while new activity is trending down, the amount of work underway remains elevated with construction on more than 244,000 homes in progress.

The construction industry has been working through a backlog of work triggered by COVID-19 home-building stimulus grants, but new home construction is expected to slow in 2023.

Master Builders Australia CEO Denita Wawn said higher interest rates have already started weighing on housing demand, with building approvals falling nine per cent in the month of November.

"However, the industry is facing immense pressure to deliver projects currently in the pipeline," she said.

"There is still a record number of homes under construction, but due to supply bottlenecks such as labour and material shortages the pace at which new homes can be built has slowed down."

Ms Wawn said the government needed to do more to address labour shortages and volatile material and energy prices to deliver on its housing targets.

"Labour shortages can best be addressed over the short and medium term by making it easier for migrants to work in Australia," she said.