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Dwelling approvals down 2.7% YE Feb – 4+ Storey Apartments slump 15%

Defying predictions of significant falls, Australia’s total dwelling approvals were down just 2.7% for the year-ended February, totaling 222,721 separate dwelling approvals. Despite that still relatively stable performance, approvals of 4+ Storey  Apartments slumped 15% over the same period. Additional analysis, set out here, suggests that Australia now operates a decidedly two-speed housing market.

Certainly from a forestry and wood products perspective, the two speed housing market is a seductive proposition, because it includes free-standing houses, as well as one and two storey townhouses. Why? Because these are still growing while the other formats are all in decline.

To start with, residential dwelling approvals by type are included in the chart below.

fig3

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

Readers are used to seeing this first chart. It shows the ongoing strength in free-standing dwelling approvals – lets call it the baseload of Australia’s housing market. We are also familiar with the experience of the 4+ Storey apartments shown at the top of the chart. They rose, have fallen, but still have not completely slumped. We can call these the peak capacity of the housing market because they operate to soak up the last bits of demand, speculate on the market and can quickly slow, as the data shows.

Approvals of free-standing houses rose 1.6% to 119,062 approvals over the year to the end of February, but they accounted for 53% of total approvals for the year. 

But of particular interest is that Townhouses of 1 Storey saw approvals increase a very strong 32.4% over the same period, totaling 10,911 dwellings, and Townhouses of 2+ Storeys rose 3.4% to 25,780 approvals.

Combined, approvals of Houses and Townhouses totalled 155,753 dwellings for the year-ended February, rising 3.6% and accounting for 69.9% of total approvals for the year. 

All of the other formats – 4+ Storey Apartments, 3 Storey Flats and 1 & 2 Storey Flats combined declined 14.6%, totalling just 66,968 dwellings. Aside from anything else we might observe that 1 & 2 Storey Flat approvals are now redundant and should be removed from the housing series.

The chart below shows the baseload capacity of the housing market – Free-Standing dwellings and Townhouses, compared with the peak capacity, consisting of Flats & Apartments.

fig4

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

There is change afoot in Australia’s housing market. The fixation on apartments has been more than a little overdone, because as the data shows, the strength in the housing economy is the formats in which families are more likely to live – and in which wood products are more likely to be deployed for framing, flooring and cladding.

So what is driving this program, and more importantly, why is it likely to continue into the medium-term future.

The chart below shows Australia’s population (the black line) and the elements of its formation. We can see that Australia’s population has been growing progressively for the last decade, fuelled by net migration, but also by a modern baby boom.

fig5

This data is important because it feeds into a population that as it grows needs progressively more dwellings. Projections by the ABS, shown below, demonstrate the main driver for family households – growing family populations. 

fig6

It is family population growth that is driving Australia’s solid and continuing baseload housing growth.

 

Posted Date: April 26, 2018

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