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Housing approvals – finally see some sunshine

After declining for the last two years and flattening out in recent months, Australia’s dwelling approvals appear to have bottomed out. Over the year-ending May 2024, approvals were 163,236, down 9.2% on the previous period. However, on a monthly basis, total dwelling approvals for May were 14,175 a rise of 5.5% on April. Importantly, detached homes were also in positive territory, with approvals for the month up 1.3% on the previous month, to reach 9,258 houses.

Though the latest data is a long time coming and sees dwelling approvals massively below the national target of 240,000 per annum, the bottom is a good place to start on the way back up!

Overall, residential approvals are improving, but it is important there is also a degree of stability emerging for the other main formats, as the table and chart below demonstrate.

Comparing the year-ending May 2024 with the prior year, sectors that are important for the timber industry are tracking reasonably well. Detached houses and Townhouses both 1 storey and 2+ storeys are reasonably consistent with the approvals experienced in the previous year. They fell sharply the year earlier and appear to have bottomed sooner than some other multi-residential formats.

The state picture is more mixed. Total dwelling approvals for the month of May rose in all states, with Western Australia leading the pack, up 19.6%. This was followed by Victoria (+8.9%), Queensland (+6.3%), South Australia (+4.1%), Tasmania (+3.8%) and New South Wales (+2.9%).

Examining the states where the largest movements were recorded provides some useful intelligence. For each of Western Australia, Queensland and Victoria, it is detached housing that has held up best.

In Western Australia, the less volatile year-ending numbers support the monthly trend, with detached house approvals year-ending May totalling 14,560, an increase over the period of 12.9%. For an overview of the WA housing market, see the item elsewhere in this edition of Stats Count, provided by courtesy of IndustryEdge and appearing recently in a publication for FTMA Australia.

This glimpse of mid-winter sunshine is welcome, but the cloudy skies continue. The level of national approvals is still well below the National Housing Accord target of 1.2 million homes over the next five years or an average 240,000 per year. Michael Bleby, writing in the Australian Financial Review, quotes Maree Kilroy, Senior Economist, Oxford Economics Australia as saying:

“…allowing for the normal level of drop out to project completions, approvals need to average around 20,800 per month”.

Its also interesting to note that affordability is having a real impact on the structure of projects going forward. Mark Stevens, Kokoda Property’s Managing Director recently received approval for a $1.5 billion five-storey mixed use development in Brisbane and commented in the Australian Financial Review:

“Skyring Terrace will have just 200 luxury apartments – well below the 350 originally planned – because it had to cater to the wealthy downsizer segment of the market that could afford to pay for new homes.”

At the same time, there are those cheering on rising prices for existing housing, arguing that until they do, the option of building greenfield housing will continue to be unattractive, because it is more expensive. The housing supply chain’s inefficiencies and associated costs are apparently having a real impact on demand for new houses and therefore, for approvals.

 

 

Posted Date: July 8, 2024

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