For more than six months, the end of the long-running Australian housing boom has been predicted, but has yet to come. Although the signs are evident – slowing approvals are the key indicator – to date we have seen an “easing” rather than a crash of the type typically observed after previous housing booms. This makes the prediction and forecasting environment all the more difficult, however, there are some clear pointers to the likely trajectory and even its potential depth.
In May 2016, Australia’s residential dwelling approvals totalled 19,514, a relatively small reduction of 2.2% compared with the previous month. For the year-ended May 2016, approvals totalled 231,081 dwellings, up 3.0% on the year prior. Total approvals are displayed in the chart below.
To go straight to the dashboard and take a closer look at the data, click here.
May also saw approvals of free-standing dwellings rise 11.5% on the prior month, accounting for 53.7% of total approvals for the month. Compared with May 2015, free-standing house approvals were up a solid 4.2%.
Semi-detached, row or terrace houses and townhouses accounted for 15.3%, rising from prior months when they represented a smaller proportion of the total than was once the case.
The remaining 30.9% of approvals in May 2016 were multi-residential dwellings (flats, units and apartments). Although approvals of one, two and three storey apartment blocks continue, the data for the largest grouping – four or more storeys – is perpetually patchy.
In May 2016, approvals of four or more storey apartments totalled 6,031 dwellings (30.9% of the total). The patchiness in these approvals primarily relates to the larger apartment buildings with hundreds of apartments in them. If none are approved in a particular month, total approval numbers fall and vice versa when they are approved.
That is why the year-end data is so important, displayed in the following chart.
To go straight to the dashboard and take a closer look at the data, click here.
While there has been a slowdown in approvals in the last year, there is no evidence of a rapid fall.
There are repeated and legitimate concerns about the state of the apartment market, about whether it has been over-heated and whether demand can sustain the prices required to fund the developments will be clearer in coming months.
That noise took a different direction in recent days as the RBA’s 0.25% interest rate cut took hold. Expectations are that the coming weeks will see a new round of investor fuelled price rises, especially in the apartment market and particularly in the already over-heated markets of Sydney and Melbourne. As the next item in this edition of Statistics Count addresses, there are real and long-term concerns about the affordability of housing in Australia, as part of growing income and living standards inequality.
However, most of these concerns seem to be far less an issue for free-standing dwellings. Australians still love houses and as the data for May shows, approvals for new construction are strong, perhaps surprisingly so. Their relative stability remains the firmament upon which the Australian housing sector relies.
