Housing approvals show first signs of growth in December

For the first time in eighteen months, December 2019 saw dwelling approvals rise on an annualised basis. The very modest increase of just 0.5% compared to the month earlier saw total approvals lift to 171,260 approvals for 2019. Despite the tiny growth, approvals were still 18.7% lower than in 2018, while even the mainstay – free-standing houses – saw approvals down 13.4% compared to 2018, totalling 103,115 dwellings.

As the chart below indicates clearly, there are no months in 2019 that resulted in higher total approvals than for the corresponding period one year prior.

Fig 14

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Drilling into the detail, our often-favourite chart shows that Houses saw out 2019 above the psychologically significant level of 100,000 approvals. At 103,115 dwellings for the year, house approvals have not fallen below the marker since 2012.

Fig 15

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The only other housing format that fared relatively well in 2019 was Flats of 1 or 2 Storey, but at just 1,519 approvals, the 2.8% decline is statistically largely meaningless. In aggregate, the non-housing formats saw approvals fall 25.3%. As the table below shows, they were lead lower by 3 Storey Flats and 4+ Storey Flats, including the much-remarked upon city apartment towers.

It is observable that Townhouses (here described as Semi-Detached) took their share of the pain in 2019, especially the 2+ Storey format. This is an important segment now and into the future for wood products because of the prevalence of increasingly sophisticated and engineered first floors, as well as their main framing appearing to be timber.

Just as what Australian are building is important to the industry, so too is where that building is occurring. The chart below shows dwelling approvals by state or territory. It charts, over the decade, some distinct patterns.

The first is the dominance of dwelling approvals in Victoria through to about 2012, then second, the rise of NSW and to some extent Queensland, before, third, the consistent declines took hold, with fourth, less impact on Victoria than the other major states.

Fig 16

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

The table demonstrates that over the last two years, the major states have borne the brunt of the downturn in dwelling approvals. We can respectfully ignore the febrile data for the Territories where small changes in numbers can have an amplified proportional impact.

Thanks to population growth, Victoria’s approvals declined 15.5% in 2019, while NSW at 22.9% and Queensland at 25.2% were hit significantly harder. These are important datapoints because the approvals feed directly into building activity and the supply of building materials.

Western Australia and South Australia are exhibiting relatively soft declines over the last year, boding well for a more solid recovery in building activity in 2020. That is certainly the case in Tasmania where growth of 3.6% bucks the national trend, even though it is just 109 more dwelling approvals than the prior year. If nothing else for Tasmania, that will likely equate to a few more jobs in the home building sector.

The end of the housing approval downturn may be upon us, but the position is still less than adequate and the data indicates the recovery will be more than a little patchy.