Australia’s new dwelling approvals continued to soften, declining 4.8% year-ended May 2022. After such a stellar run, it is unsurprising to find free-standing houses declining most: approvals were down 10.4% year-ended May to a still very strong 128,944 houses.
Underscoring the general easing, monthly approvals have fallen for five of the last six months, as the chart below shows.
Considering approvals by type over the last three years, we can see that for all they are softening, free-standing houses are still completely dominating the Australian residential landscape. There is however another factor of interest in the approvals. The solid growth in townhouse approvals – especially 2+ Storey Townhouses – is persistent and at 16.7% annualised growth year-ended May, is rivalled only by Flats of 4 to 8 Storeys (+21.0%).
It may not always be the case, but it is of note that as houses decline, the most similar housing formats – and those using the next most wood products – are experiencing a period of growth, no matter how small.
At a state level, the interesting story is Victoria, which has continued to exhibit growth over the year-ended May 2022. The Victorian growth has mainly been due to those strong increases in Flats 4-8 Storey and Town Houses 2+ Storey, which have offset the decline in detached houses.
The contrast may well be for Western Australia, which year-ended May is experiencing a sharp decline from 2021 but continues to work at levels above 2020.
Looking more broadly at housing supply, an interesting report from Prosper Australia was reported in an OpEd piece in The Age on 27th July.
While many building industry advocates have claimed the issue with housing affordability is the red tape and inertia by planning agencies that suppresses supply, Prosper Australia’s research suggests supply, or at least the sale of land lots is constrained/controlled deliberately to ensure price levels are maintained.
This is perhaps not a surprising outcome, but a telling graph in the executive summary shows land prices remaining strong, while the sale of land lots has declined since July 2017.
It might be that with approvals still up near record levels and record amounts of work in the pipeline, there is little or no need for increased land releases. Right now, that is. But according to the Karl Fitzgerald, the report author, it might be that the ‘slow release’ of lots that have been approved is aimed at managing the price of those lots and the houses on them. It could then follow that this is where demand can build up, only to be brought to market when it absolutely suits the land bankers.
That is a possibility and in truth, is probably one of the many features of the multi-faceted, enormous and complex market that is Australian housing.