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Housing approvals down 21.5% YE July

The downturn in residential dwelling approvals continued in July, with monthly approvals falling 2.6% compared with June. On a year-end basis, approvals for all dwellings were down 21.5% on a year earlier, totalling 181,014 separate approvals. The most populous states – New South Wales and Victoria – experienced total falls of 22.3% over the course of the year. Building supplies businesses and economic commentators appear to differ on the likely direction of the housing market over the next year or more.

 

As the chart below shows, while total residential dwelling approvals are down, most of the pain has been taken by 4+ Storey Apartments, approvals of which collapsed almost 40% over the year-ended August 2019.

 

Fig 1

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

 

 

As a later item in this edition of Statistics Count addresses, we can reasonably expect the downturn in apartment approvals to flow through to a workforce that will move away from dwelling construction, as projects come to an end.

 

That is one element of the downturn, and it has implications for the quality and pace of any recovery (it is pretty hard to build new houses if the workforce has followed the money and is in other jobs).

 

Another element of the current market is that fuelled by two successive interest rate cuts, there have been signs of some improvement in housing inquiries and reportedly, people going through display villages and seeking quotes. Brickworks (the brick manufacturer) was spruiking to Simon Evans of the Australian Financial Review on 20th September, the view that the bottom of the market has already passed and that “Orders and sales have stabilised”.

 

Maybe, but the thing about these ‘green shoots’ as they are often described, is they are not money in the bank, and one company’s order book could well be at another company’s expense.

 

Moreover, as Duncan Hughes identified in the Australian Financial Review on 23rd September, global banks like Morgan Stanley consider that:

 

“Residential property is in a trough and dragging along market bottom rather than set for a rebound that will reinvigorate the economy.”

 

So, in some respects, we return to the fundamentals for our market evidence. That starts with building approvals data (we concede these are historical in nature and do not translate to a guarantee of a certain amount of work at a certain point in time).

 

The table below shows dwelling approvals, by type for each of the last two years-ended August. It displays in part what we observe above in the chart. That free-standing houses are doing relatively well compared with the other major housing formats.

 

 

 

 

YE Jul ’18

YE Jul ’19

% Change

Houses

122,555

108,914

-11.1

Semi-Detached,  1 Storey

9,778

7,310

-25.2

Semi-Detached,  2  Storey

27,055

21,301

-21.3

Flats 1 or 2 Storey

1,585

1,452

-8.4

Flats 3 Storey

3,824

2,480

-35.1

Flats 4  Storey

65,811

39,557

-39.9

Total Dwelling Units

230,608

181,014

-21.5

 

 

 

Still, even free-standing house approvals are down 11.1% over the last year, and depending on who you believe, things will get better from here, or they will get worse. It will be one of those outcomes at least!

 

Turning to some state-based analysis, we can observe below that the year-ended July 2019 saw the lowest level of approvals of the last six years. The 21.5% aggregate decline is evident.

Fig 2

 

 

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

 

 

 

 

What is also clear is that the fall in approvals has been solid and pretty much uniform for the three most populous states: New South Wales, Victoria and Queensland. The table below shows those details. They are important details because the combined 23.0% decline in approvals for those three states alone removed 43,824 separate dwelling approvals, or nearly 87% of the total decline!

 

 

 

 

YE Jul ’18

YE Jul ’19

% Change

NSW

        71,412

        55,508

-22.3

VIC

        75,567

        58,731

-22.3

QLD

        43,556

        32,472

-25.4

SA

        12,770

        10,978

-14.0

WA

        18,179

        15,692

-13.7

TAS

          2,965

          3,137

5.8

NT

             801

             637

-20.5

ACT

          6,503

          5,166

-20.6

 

 

 

So, it is worth checking in on one of these states. This month it is Queensland, a vast geographic space, hugging a huge portion of the South Eastern seaboard, with most building activity jammed in against the coast. When we think of housing in Queensland, it is hard to go past the massive high-rise apartments, even though we would all prefer a traditional timber ‘Queenslander’ (traditional or modern).

 

But the data does not bear out the proposition that Queensland is all about the 4+ Storey apartments – at least no more so than NSW and Victoria. While the 4+ Storey dwellings saw approvals plunge 35.7% over the year-ended July, that is less than the national average 39.9%. More is the point, over the last year, 4+ Storey apartment approvals in Queensland accounted for just 16.8% of total approvals, down from 19.5% the prior year.

 

Just like the rest of the country, in Queensland, the housing market is all about free-standing dwellings.

 

 

Fig 3

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

 

 

 

YE Jul ’18

YE Jul ’19

% Change

Houses

        26,574

        21,061

-20.7%

Semi-detached 1 Storey

          2,120

          1,061

-50.0%

Semi-detached 2 or 

          5,317

          4,170

-21.6%

Flats 1 or 2 storey

             213

             324

52.1%

Flats 3 storey

             725

             279

-61.5%

Flats 4+ Storey

          8,470

          5,445

-35.7%

Total

        43,419

        32,340

-25.5%

 

 

Posted Date: September 30, 2019

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