Building approvals slump as industry braces for tax changes – Master Builders analysis

THE recently-released ABS building approval data for April shows a 3.4% drop in new home building approvals overall. But in a closer look, that average is made up of higher density dwelling approvals falling by 7.2%, but new detached houses only dropped by 0.9%.

“Today’s results confirm that new home building was already on the back foot in the lead up to the May Federal Budget, with approvals falling in both March and April,” Master Builders Australia chief economist Shane Garrett said.

“Independent modelling tells us that the Federal Budget changes including new restrictions on negative gearing and capital gains tax will result in a net decline of 8,700 new homes from the building pipeline over the next four years, exacerbating our shortage of homes,” Mr Garrett said. 

Independent modelling also showed that the Budget would hit construction jobs and GDP while causing rents to increase, according to Mr Garrett.

Master Builders Australia CEO Denita Wawn said a housing crisis was not the time to place more hurdles in front of small builders, who make up 98% of the industry.

“A housing crisis is the time for governments to focus on policies that increase housing supply, including addressing a workforce that is hundreds of thousands short, reducing unnecessary red tape, and improving, not disincentivising, the investment pipeline,” Ms Wawn said.

“Competition regulators must also ensure the surcharges recently introduced by some businesses in response to the Middle East conflict are rolled back as swiftly as they were introduced when conditions allow.

“These pressures are being compounded by broader economic factors, including the impacts of global conflict and higher interest rates. Master Builders is urging policymakers to take into consideration all of these factors, and to ensure that the Budget legislation is an intervention that will increase and not decrease our housing supply,” Ms Wawn said.

In addition to the tax hikes on housing, the Federal Budget also proposes tax changes to trusts. 

“Builders are particularly concerned about the lack of grandfathering provisions in relation to trusts, which creates uncertainty and potential cost implications for long-established business structures,” Ms Wawn said.

“It risks unintended consequences across the building sector, with small businesses using this business structure to manage the inherent risks and volatility in the sector.

“In order to grow the number of builders and housing supply, small businesses require a system that is consistent, predictable, and recognises how they actually operate, and more consultation is needed in this space,” Ms Wawn said.

www.masterbuilders.com.au

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