Australia’s dwelling approvals continue to decline, in line with expectations and consistent with their trend. Year-ended April, approvals were down 14.8% to 176,676, compared with the 207,465 recorded for the year-ended April 2022.
Previous high months are still masking the size of the approval declines, which are only evident when examining individual months. Approvals in April 2023 reached just 11,594, the lowest monthly total since 2012!
The first chart shows total Australian dwelling approvals by month and annually, with the red line showing approvals of free-standing houses. House approvals totalled 109,506 to the end of April, down 16.3% on the prior year.
Houses have not been alone in copping a pasting over the last year. Two+ Storey Townhouse approvals are down 22.1% year-on-year, but the difference there is they are only 4.8% lower than recorded two years ago. Houses, by contrast are down more than 21%.
At the other end of the market, an interesting divide has opened up between 4-8 Storey Flats (down 19.7% year-ended April) and 9+ Storey Flats (up 6.3% year-ended April). The difference appears to be the time it takes to get apartment buildings ‘to market’ and therefore approved. There is a lag effect in operation, it seems.
Approvals will continue to decline if the sales experience of the major builders is anything to go by. That may not be a major problem for as long as the speed of the decline might suggest, thanks to the potential National Housing Accord stimulus and the pipeline still having some heat left in it.
The other factor of relevance is there is an undersupply of housing in the Australian market right now.
As the CBA’s Belinda Allen told Kate Aubrey of Mortgage Business’ “…The lack of new supply at a time when vacancy rates are low, household formation rates remain well below pre-pandemic levels and rapid population growth will mean rents, and home prices will continue to face upward pressure,”
Aubrey then went on to paraphrase Allen:
“As such, there is ongoing discussion regarding where and how new housing should be built, considering options such as green fields on the urban fringe or infilling existing urban areas with critical infrastructure..”
There is at least a reasonable prospect that the approvals slump will be like a nip from a puppy – sharp, but hopefully short-lived.
