Core Logic’s Cameron Kusher has published an interesting post examining dwelling construction trends at the national level, which shows that the construction of units is tracking at record highs with more in the pipeline:
At the end of March 2016 there were 215,863 dwellings under construction nationally, 63,414 of which were houses and 152,449 which were units…
While the number of dwellings under construction is at record highs we are also seeing an elevated number of houses and units which have been approved for construction but not yet commenced. At the end of March 2016 there were 8,817 houses and 24,175 units which had been approved for construction but not yet commenced…
The record-high number of dwellings under construction and the continuing strong pipeline of approvals should ensure that there is plenty of work for the construction industry over the coming years. There is the concern of over-building in certain areas especially considering in certain locations much of the new unit supply in particular is targeted at an investor rather than owner occupier market. We would expect that over the coming quarters an increasing proportion of dwellings, particularly units, which are approved for construction will not be commenced. This is largely due to challenges with securing enough presales to trigger commencement of these projects.
The upshot is that rents, which are already falling, should remain under ongoing pressure as the new supply continues to hit the market.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
