Building approvals have slumped to their lowest levels in more than a decade. The reduction in supply puts further upward pressure on residential rents.

Australian Bureau of Statistics figures show total new approvals were down almost 28% in January with 12,065 approvals the lowest figures since July 2012.

Standalone home approvals dropped 13.5% in January, while apartments, townhouse and semidetached homes approvals dropped by 44%.

BIS Oxford Economics senior economist Maree Kilroy says increasing interest rates are stopping people from committing to new housing.

She says further rate rises will impact on the demand for new homes.

“Inquiries for greenfield land and off-the-plan apartments are down sharply on a year ago and are set to remain weak over the year ahead,” she says.

“For households that put down deposits on land lots over 2021 and 2022, finance at settlement has become challenging.

“Financing the build stage has similarly become tougher, where higher borrowing costs and a near-30% run-up in construction costs are both impacting.”