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Barry Crocker! Housing approvals collapse

Australia’s residential dwelling approvals plunged in June, in a demand shock that most predicted, but few understood would see activity fall so low. At an annualized 185,825 approvals were 19.6% lower than for the prior year. Approvals are now at their lowest level in six years, with attached dwelling approvals down 30%, and the high-rise component (4+ Storeys) down 37% on a year-on-year basis.

The first chart displays the details over the last decade. While the time period makes the data a little busy, it serves to accentuate a couple of key points. 

First, the rate and length of decline in approvals is already the fastest and longest of the last decade. Second, annualized declines are virtually locked in now, for the rest of the year, meaning approvals are likely to fall further.

fig1

To go straight to the dashboard and take a closer look at the data, click here.

Picking up on the ‘still falling’ sentiment, the Australian Financial Review (Michael Bleby, 31st July 2019) carried news of the latest forecast from UBS, whose economist George Tharenou said:

“We forecast no recovery with dwelling commencements to drop to 170,000 this year.”

Tharenou’s comments were extended when he outlined that UBS expects approvals to fall a further 10% over the next year, with modeling suggesting as many as 100,000 job losses in construction alone.

The second chart shows dwelling approvals by type over the decade. The solid block at the bottom, unsurprisingly, relates to free-stand dwellings. The next two groups up are the relatively stable Semi-detached or Townhouses, followed by the virtually irrelevant (statistically!) one, two and three storey flats. At the top of the chart are the 4+ Storey apartments that provide most of the froth and bubble, as well as the flat and sour of Australia’s housing market.

fig2

To go straight to the dashboard and take a closer look at the data, click here.

The table below shows the annualized detail for each of the last two years, by dwelling type.

 

  YE Jun ’18 YE Jun ’19 % Change
Houses 122,426 110,202 -10.0
Semi-Detached,  1 Storey 9,834 7,586 -22.9
Semi-Detached,  2  Storey 26,739 22,412 -16.2
Flats 1 or 2 Storey 1,533 1,416 -7.6
Flats 3 Storey 4,032 2,494 -38.1
Flats 4  Storey 66,474 41,715 -37.2
Total Dwelling Units 231,038 185,825  -19.6

Other commentators were quick to point out that the approvals pain for the apartment sector is likely to continue, especially because of ‘downside risks’ associated with building quality now entering the marketplace.

 

Meantime, approvals of free-standing houses remained more resilient than the aggregate market. Approvals of houses were down 10.0% to an annualized 110,930 approvals year-ended June. In June itself, monthly approvals rose 0.6% compared with May, rising to 8,687 separate approvals.

Turning attention to approvals for each state, we can see below that New South Wales and Victoria were relatively equal in their decline over the last year. Both recorded dwelling approvals down by around 21%. They were out-collapsed though by Queensland, which saw its dwelling approvals fall more than 23% over the same period, with other states faring better.

fig3

To go straight to the dashboard and take a closer look at the data, click here.

 

  YE Jun ’18 YE Jun ’19 % Change
NSW 72,669 57,538 -20.8
VIC 75,811 59,927 -21.0
QLD 43,191 33,163 -23.2
SA 12,810 10,696  -16.5
WA 18,423 15,676 -14.9
TAS 2,851  3,121 9.5
NT 773 673 -12.9
ACT 5,664 6,311  11.4

To examine the effect that different types of dwelling have on total statistics, Victoria provides the most-stark example. As the final chart shows, dwelling approvals for the nation’s second most populous state were down 21.0% over the year-ended June, but free-standing house approvals declined just 7.1%, almost 3% stronger than the national average. The chart shows where most of the pain was taken up.

 

fig4

To go straight to the dashboard and take a closer look at the data, click here.

 

  YE Jun ’18 YE Jun ’19 % Change
Houses 39,576.0 36,747.0  -7.1
Semi-detached, 1 storey 2,184.0 1,541.0 -29.4
Semi-detached, 2+ Storeys  11,635.0 9,375.0 -19.4
Flats 1 or 2 storey 408.0  102.0 -75.0
Flats 3 storey 1,180.0 872.0 -26.1
Flats 4+ Storeys 20,634.0 11,087.0 -46.3

 

While the total decline in Victorian dwelling approvals is consistent with the nation’s performance and the other declines are all more or less in order, the big volume decline was reserved almost entirely for 4+ Storey apartments.

It is true the total housing market in Australia is down, but the real Barry Crocker was in the high-rise apartment sector. 

Posted Date: August 8, 2019

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