Victoria’s housing market showed subdued activity in Q1 2024 with 11,099 dwelling approvals, marking the lowest quarterly total since Q1 2013 and a 4.0% decline from the same period last year.

This decline reflects ongoing challenges, including weak lot sales and high construction costs, which have dampened demand for new houses and constrained the feasibility of medium and high-density developments.

Quarterly approvals for detached houses (7,764) and townhomes (1,957) reached decade low levels, down annually by 3.2% and 18.6% respectively. meanwhile, apartment approvals increased modestly by 21.7% to 1,378 units but remain below long-term averages.

Total commencements declined by 19% over FY2023, with both detached house and multi-unit starts seeing a sizeable reduction in construction activity.

These declines were in response to challenging market conditions with diminished borrowing capacity and cost of living pressures impacting demand, and escalating building and funding costs impacting supply.

Looking ahead, commencements are forecast to decline slightly over FY2024 and FY2025, falling by 4.9% over the two years to 51,950 dwellings.

Weak lot sales activity since the start of the rapid increases in interest rates from mid-2022 has embedded further declines in detached house construction which is forecast to decrease by 21% to 28,240 starts by FY2025.

Despite this projected increase, the resulting detached home commencements will remain more than 11% lower than the average annual starts over the 20 years to Fy2023.

Conversely, multi-unit starts are expected to increase by 24% over the same period, reflecting demand shifts towards more affordable townhomes and apartments. Further growth of 21% in multi-unit starts is anticipated by FY2026, driven by persistent affordability concerns and shifting consumer preferences.

This article references findings from our Q1 2024 Economic and Residential Property Market Report.