Australia’s stimulus fuelled, interest rate-supported and pandemic inspired dwelling approvals boom continued in May 2021. Total approvals remained above 20,000 for the third successive month, but the real story is free-standing house approvals: up 36.9% compared to a year earlier, at 143,158 separate approvals.
In total, full year approvals reached 211,227 year-ended May, below the all-time record. However, the 67.7% of those that were free-standing houses – all 143,158 of them – are at record levels, as the chart below shows.
The annualised chart tells the story and in particular, shows the gap closing very quickly between year-end free-standing house approvals (the red line) and the total (the green line). That is because, as we can observe below, the growth has been confined almost entirely to houses, over the last year.
Indeed, approvals of the high-rise formats (4-8 Storey and the newly measured 9+ Storey apartments) went backwards over the last year.
In short, the pandemic, the nature of the stimulus, the pent-up demand and all the growth, has pushed towards houses, on their own blocks, usually further out from the cities. It is as though, locked down and locked in, the new home buyer prefers some idea of ‘wide open spaces’ and really does want a bit more space between them and their neighbours (and their family members for that matter).
Tarun Gupta, the new head of Stockland said as much to the Australian Financial Review’s Michael Bleby in mid-June. He commented:
“Because the workplace is different, people are working from home more, and the are choosing to buy bigger homes.”
Mr Gupta added that Stockland considers about 20% of their customers are choosing houses further out, rather than staying in the commuter suburbs. That also is a nod to the still-evolving work from home revolution. The interesting question might be when, and possibly if, this phenomenon will end.
Returning to the immediate, it does seem likely that the decline in approvals in May occurred because of the end of stimulus measures and the tailing off of the approvals booked under the stimulus era. Monthly approvals in May were down for both free-standing houses (-10.3% MoM) and total dwellings (-7.1% MoM).
Proving that even in the immediacy of a pandemic response there is much that is long-term locked in with the housing sector, Victoria continued to dominate Australia’s dwelling approvals over the last year.
In the most locked-down state in the country, total dwelling approvals hit 65,391 up 8% on the prior year. Significantly, for our industry, free-standing dwelling approvals were up 28.3%.
It could be – but probably isn’t – that the lockdowns allowed families to get on with choosing a new house and locking that into the State’s approvals. But that would deny the reality of the housing acquisition pathway that takes households quite a while to go from the kernel of an idea to an actual contract that then becomes an approval.
In any event, as shown below, the growth in Victoria is all in houses and mainly, in new or expanding outer suburbs.
The Victorian experience compares with a total of just 46,284 dwelling approvals in NSW, where free-standing dwellings were up 22.2% to 29,485. Had it not been for growth in multi-residential formats, the gap would have been even wider.
We can be amazed and more than a little surprised at the massive growth in dwelling approvals over the last year. However, it is time to set that aside because it takes up energy from the equally massive task of getting the biggest pipeline of work in Australia’s history actually built.
