Australia’s approvals of new dwellings fell to a decadal low year-ended August 2023, declining to 169,212 separate approvals, recording a 13.1% fall on the prior year. In August 2013, annual approvals totalled 167,743 separate dwellings, a position from which approvals soon recovered.
Approvals of detached houses totalled 103,214 year-ending August 2023, the lowest level since February 2020 when house approvals were 103,811 back when the economy was headed for a recession as a consequence of COVID-19. Ironically, that preceded a boom (which is well truly over) due to the subsequent COVID stimulus measures.
Looking specifically at the monthly approvals, the picture is not quite as bleak with higher activity levels experienced in August and some commentators suggesting the pent-up demand is irrepressible, potentially signalling the plateauing of the new dwelling market.
Since January, detached housing approvals have averaged 8,370 per month, with activity in the past two months above that level.
Total dwelling approvals have been more volatile on a monthly basis, but results for August were positive, with approvals of 13,647 dwellings up 7.0% for the month.
Other types of dwelling stock are also showing signs of renewed life.
2+ Storey Townhouse approvals were 22.3% lower year-ended August, around 6,000 approvals lower at 20,884 approvals. There is no joy here, at least not yet. There are expectations this will be the sector to ‘pop’ over the coming year.
Rhett Simonds from the Simonds Group announced profitable trading for the September quarter and commented that confidence was returning to the market. He said: “…to offset the loss of traditional business Simonds has re-entered the medium density town house sector.”
Inquiries, negotiations and sales precede approvals and it seems the Simonds Group is following the patterns of interest, as it pursues the future. Though not clear from the company’s statements, it is possible multi-residential properties offer improved margins over individually built free-standing dwellings.
The progress in multi-residential dwelling approvals is interesting, with approvals for 9+ Storey apartments, reaching 22,521 year-end August 2023, an increase of 11.9% on the previous period. Whilst this is well down on the peak of 37,524 in July 2018, it is still a solid result and evidence of the developers, institutions and investors re-entering the market.
The stabilisation of building costs evident in the Producer Price Index results is flowing through to the multi residential sector.
Developer Mark Steven from the Kakoda Property Group was quoted in the Australian Financial Review saying:
“…moderating building costs make apartment projects more viable than they were… Easing construction costs and growing confidence that the fastest rate tightening cycle in a generation maybe ending was making it possible for developers to meet demand….”
At a state level, Victoria had a big month with total approvals for August reaching 5,088 dwellings, a 30.7% increase on July and the largest number of monthly approvals recorded this year. However, the reality check is the year-ending data, which strips out some of the monthly volatility. At 53,639 year-ending August 2023, Victoria’s approvals were down 14.9% on the previous period.
Despite some positive monthly news, it is unclear if the bottom of this cycle has been reached. A lot depends on the trajectory of interest rates. Maree Kilroy, Oxford Economics Australia’s Senior Economist quoted in the Australian Financial Review flagged there is still more grief to come saying: “We expect national dwelling commencements to slide below 150,000 this financial year”.
That may be spot on, but there is some hope it is a little pessimistic.
