Australian dwelling approvals were down 16.8% year-ending October, falling to 191,601 approvals. The biggest falls have been recorded by houses, which have slipped 22.1% over the same period, and have fallen to 118,711 on an annualised basis.
Large though these falls are, they still represent a very strong level of demand, particularly when combined with expansion of town house construction. Year-ended October, 2+ storey townhouse approvals totalled 25,246 down just 3.5% on the previous year.
The chart below shows approvals of houses and total approvals.
While the sector certainly has its eyes on houses, the townhouse approvals are equally important. Proportionally, they use as much and often more timber and wood products than the average free-standing house, after all.
In this second chart, we can observe the role of the 2+ storey townhouse, especially when coupled with houses.
Considered at the state level, Victoria remains relatively strong, with total approvals reaching 62,597 year-ending October, a decline of-9.9% on the previous year. However with a substantial decline in detached housing, approvals have been boosted by big increases in multi residential. Approvals of 9+ storey flats totalled 7,516 year-ending October, an increase of 155% over the previous year.
By contrast, NSW, Queensland and Western Australia have each faced steep falls over the last year, as the chart below shows.
As we have discussed previously, what is likely to soften the blow of falling approvals is the amount of work in the housing and construction pipeline that has simply not yet commenced or has commenced and is not being completed in anything like a timely manner. The amount of work in the system is bewilderingly large and appears to represent more than one year’s capacity at the best of times. Slowing completion rates indicate the system is by no means operating at its best.
It could be that a soft landing is indicated because of this combination of factors, and certainly, that’s what commentators and reporters alike are suggesting, as Michael Bleby wrote in the AFR.
As previous reported in Statistics Count, there is a clear link between existing house prices and demand for new housing construction. At present the impact on existing house prices is being driven by interest rate rises to combat inflation which is discussed elsewhere.
Recent data from Corelogic suggests that the decline in prices may be near the bottom of the cycle, with house prices dropping only 1% nationwide in November, the smallest monthly fall in 5 months. Nila Sweeney in the AFR quotes Tim Lawless, CoreLogic Research Director as saying, “I describe this as early signs that we may have moved through the worst of the downturn”.
But, given there may be further interest rate rises to come, some commentators are expecting further falls in prices, although at a slower rate.
