The number of homes that received the green light to start construction has increased for the first time in five months.

Figures from the Australian Bureau of Statistics (ABS) showed a 6.8% growth in housing permits in August, ending four consecutive months of decline.

The recovery was driven by the surge in approvals for semi-detached houses, apartments and townhouses, which posted a monthly growth of 13.7%.

ABS construction director Daniel Rossi said approvals for detached homes have also increased by 3.5%.

“The August result indicates that approvals for detached homes remain strong despite the phasing out of stimulus in April and the ongoing lockdowns in New South Wales and Victoria,” Rossi said.

As a result of low interest rates, increased household savings and confidence in the housing market, approvals for private housing increased by 23.8% year-on-year.

A total of 18,716 homes were approved for construction this month.

Why this can be good for the affordability of housing?

The Grattan Institute recently contributed to the parliamentary inquiry into the affordability of housing in Australia.

In the entry, Brendan Coates, director of economic policy at the Grattan Institute, wrote that Australia has yet to build enough housing to meet the needs of its growing population.

“The number of homeowners is falling. Without change, many more young Australians will be excluded from the housing market,” said Mr Coates.

“Having a house increasingly depends on who your parents are, a big change from 35 years ago.”

Data from the Grattan Institute shows that Australia has just over 400 homes per 1,000 inhabitants.

Mr Coates claimed that, in addition to having the least housing stock per adult in the developed world, Australia is also one of the few countries where the housing stock per capita has stagnated in more than two decades.

“The mismatch between supply and demand has resulted in a ‘zoning premium’ for well-located homes that benefits existing property owners but adds additional costs to new buyers and tenants,” he said.

By building 50,000 additional homes per decade each year, house prices and rents could potentially be 20% lower than they otherwise would have been.

“Without a concerted effort to increase housing supply in Australia, housing affordability is likely to deteriorate,” said Mr Coates.

Another recommendation in the Grattan Institute’s policy submission is tax policy reform to reduce housing demand.

“It should reduce the capital gains tax cut from 50% to 25%, abolish negative gearing and include owner-occupied homes in the old-age pension ability test,” said Mr Coates.

“The effect on real estate prices would be modest — they would be about 2% lower than usual — and potential homeowners would gain at the expense of investors.”

Photo by Burst on Pexels.

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