Australia has reported its weakest financial year for new dwelling approvals in 13 years, with only 162,892 homes approved for construction by June 2024, marking an 8.5% decrease from the previous year.

In June, total dwelling approvals dropped by 6.5% to 13,237, reversing a 5.7% increase in May and marking the first decline in five months.

Private sector house approvals decreased by 0.5% in June, significantly impacted by a 19% decline in New South Wales, which recorded its lowest approvals since January 2013.

New South Wales saw only 1,597 private houses approved in June, the lowest figure since 2013, while Queensland experienced a contrasting 16.1% increase in private home approvals.

The decline in building approvals is attributed to higher interest rates, rising material and labor costs, which have led to housing shortages and affordability issues.

Material and labor shortages have also increased the average value of new houses by $19,444 over the past year, further complicating the housing market.

While the timing for recovery in apartment approvals remains uncertain, positive trends are anticipated to begin in 2025 as interest rates decrease and government policies support housing.

Economists are calling for additional policy measures to lower land and construction costs, including faster land releases and support for higher density developments.

Federal and state governments are aiming to boost home building under the national housing accord, targeting the construction of 1.2 million new dwellings over the next five years starting in June 2024.

Despite these ambitious targets, experts predict that home building will likely fall short of the goal set by the National Housing Supply and Affordability Council.

The Australian Bureau of Statistics is set to release the June quarter Consumer Price Index data, which could significantly influence the Reserve Bank's monetary policy decisions.