Despite a growing national housing crisis, Australia faces a significant delay in housing construction, with 37,074 approved dwellings yet to commence. 

The latest analysis from KPMG Australia suggests that nearly half of these stalled projects are located in Sydney (30 per cent) and Melbourne (18 per cent).

The data for December 2023 indicates an increase in 'approved but not yet commenced' dwellings by 8 per cent in Sydney and 11 per cent in Melbourne compared to the five-year December average. 

“There is always a lag between housing being approved and construction commencing, but current estimates show an abnormal number of dwellings sitting in this category, suggesting other market factors are stalling the pipeline of new builds,” says KPMG Urban Economist, Terry Rawnsley.

A significant portion of these delays pertain to higher-density housing. 

In Sydney and Melbourne, approximately 80 per cent of the stalled dwellings are townhouses and apartments. Increased construction costs and rising interest rates have deterred the commencement of many of these projects. 

“With all the construction price increases and where interest rates have landed, it’s hard for developers to make those more medium to high-density projects stack up,” Rawnsley says.

Brisbane has also seen an increase in approved but not commenced dwellings, with 2,610 stalled projects, an 8 per cent rise over the five-year trend. 

Unlike Sydney and Melbourne, Brisbane's delays are predominantly in detached housing rather than townhouses and apartments.

Conversely, Perth's housing market appears robust, with a 9 per cent decrease in stalled dwellings compared to the five-year average. 

Rawnsley attributes this to a decrease in housing approvals, resulting in a diminishing pipeline. 

“The number of approved but not yet commenced dwellings has been drifting lower over the past couple of years in Perth, but this isn’t surprising since there has also been a significant fall in approvals, so the pipeline is drying up,” he says. 

In the rest of Australia regions, the number of approved but not yet commenced dwellings in the has surged by nearly 20 per cent, driven primarily by a record number in the ACT, which saw 1,772 stalled projects - a 63.5 per cent increase from the five-year December trend.

“With housing prices now rising, strong population growth, and construction costs starting to stabilise, developers could be gaining more confidence to start housing projects,” Rawnsley says.

Developers have yet to start work on nearly 40,000 new homes across Australia, including 11,170 in Sydney, despite being granted building approvals. 

This delay is attributed to persistently high interest rates and construction costs. 

According to KPMG's analysis, 15,593 dwellings in New South Wales and 7,897 in Victoria were awaiting construction commencement by December 2023.

In Melbourne, the figure stands at 6,840, marking the second highest in the past five years. “Melbourne’s higher-density developments are still facing challenges in making them financially viable,” Rawnsley said.