NSW units approvals rocket

August building approvals are out and month on month approvals nationally jumped 11.4% from a depressed level. Private sector housing approvals remained very subdued, falling 1% m/m and 9.5% y/y. However units approvals rocketed 35%, propelled mostly by a huge jump in NSW. There were also smaller rises in VIC  and QLD but both remain in down trends:

One might surmise that the affordability issue is finally driving some sort of supply response in Sydney units. We don’t want to get too overexcited by one month’s data, but the potential irony here is, of course, that we have another housing market firing up a supply response just as the housing cycle weakens. More grist for the ‘distortions of the slow response’ argument.

Houses and Holes
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  1. Maybe the previous Labor government was purposefully restricting approvals to push up prices for those donators that were allowed to develop. Or maybe it is just a coincidence.

    • I tend to agree. NSW Labor did sweet FA for the whole 16 years they were incumbent, hence the appaling situation NSW/Sydney is finding itself wallowing in. When O’Farrell got in, I was hoping he would change this around and judging by these latest approval numbers, NSW Libs could be doing just that. Fingers crossed this becomes a trend.

        • yeh i thought it was state gov releasing the land and local gov that was the bottlneck in approvals..

          also I think we are giving a little too much credit to politcians especially the union rabble weve had in NSW for a decade or so.. they arent exactly known for thinking past stage 1.

        • True, didn’t think of that. I know O’Farrell has planned to release more land, so I must have got mixed up.

  2. That is a whopper of a monthly increase. Cannot for the life of me think where/what it is? (i am in Sydney).
    Could it be that developers are trying to get planning approval to take advantage of the soon-to-end stamp duty exemptions for first home buyers under $500k by selling off the plan before year end????

        • Thanks for the clarification, I was under the impression it was for all properties.

          I think this is a good change as it encourages new supply.

          • The easiest way to encourage new investment supply in the way that NG was supposed to is to change the ATO defined lifespan of a dwelling.

            It’s currently 40 years and offers a 2.5% tax deduction based on the structure’s build cost.

            If the government were genuine about encouraging new and redevelopment, they’d ditch NG and change the lifespan to say 20 years. They can always change it upwards later.

    • I think this could definitely be having an impact, but not for this reason. Perhaps developers were holding off applications until they were certain that the stamp duty concessions would apply to new builds in 2012. Once they found out that applied and were approved… hence the big jump all at once. Just a thought.

    • Concessions still remain for new properties.

      Probably more a case of developers realising that the changes to concessions will increase demand for new apartments in 2012.

      Hopefully the Fed govt will see the light and remove FHOG on existing properties.

  3. pyjamasbeforechristMEMBER

    This tells me 2 things.

    1 houses are now too expensive for first home owners to afford even if mortgaged to the eye balls so they are buying units.
    2 they are trying to get in before the NSW government changes the stamp duty exsemption rules on 1st Jan.

    ie its a false indicator

    BREAKING NEWS The NSW State Government announced on 6th September 2011 that as of 1st January 2012 stamp duty concessions will only be available to first home buyers purchasing a brand new home or vacant land intended to be used as a site for a first home. So purchasers of established properties will no longer receive a stamp duty concession as of 1st January 2012.

    • 1. Housing within “first home buyer” price range is typically on the fringe, so those who want to get something closer have to opt for a unit. This is encouraged by higher-density planning.

      2. The stamp duty exemption on new home/unit sales are still going to be in place, but that means buying off the plan for these units and waiting 1 – 2 years to move in, so the stimulatory effect is delayed.

    • Haha gold!

      It’s seriously going to hit the fan in Melbourne. There are half a dozen new high rises in or very close to the CBD – many of them with studios the size of a 20′ shipping container. They’re not selling now, so those massively expensive towers are surely going to lead to developers defaulting in a blaze of glory.

  4. Its highly unlikely that the stamp duty concessions had anything to do with these figures. Assessment timeframes for major DA’s are sitting at around 100 working days from lodgement to approval. Wasn’t the change only announced in the beginning of September?

    My guess is that increase is down to the Department of Planning and Infrastructure clearing out applications made under the old Part 3A process. This will be an anomaly and we will see the figures return to trend (or below) next time.

  5. As previously noted in a prior post in June, apartments are going ballistic in Sydney. The factors are;

    1.Chinese purchasers knocking the locals out of the market.

    2.Close to the city, CBD and public transport, train stations etc, also Universities.

    3.Longer congested traffic peak periods and lost productivity makes inner city more desirable.

    4.Examples of these; ERA at Chatswood by Mirvac, 295 apartments 94% sold in one weekend http://www.smh.com.au/business/mirvac-upbeat-as-sales-hit-target-20110517-1er5z.html,
    Discovery point Tempe by Australand, similar results, 126 apartments, 95% sold in one morning.

    5.Quick facts – 25% sold through Hong Kong offices 90% Asian buyers (Mirvac building 100% Asian) , 60% investors, 70% below $600,000. Young Asian students and couples purchasing property.

    6.Funding requirements – 75% presales with 10% deposits. 25% FIRB sales only. (however in reality Chinese money makes up 90%).
    7.And the urgency of more property with same criteria. http://www.theaustralian.com.au/business-old/property/mirvac-meriton-in-battle-over-450m-failed-chatswood-project/story-e6frg9gx-1225877643620

    Should also note most institutional developers have slow to almost stand still house sales in the burbs, between 25km and 40km out from the CBD.

    With other major capital cities slowing down, this places more emphasis on a model that is currently works. Ie. Sydney apartments.

  6. Mrrobbo, that sounds reminiscent of the Japanese buying up the Gold Coast late 80s, and I suspect like the Japanese, many of these buyers will get burnt, as it sounds very bubbly & speculative.

    If those figures are even remotely correct for Chinese buyers, if it hits the media it will be political poison, and might prompt some clampdown on foriegn investment. Hell, the Chinese guy in the office next to me was talking this morning to me about all these Chinese buyers wanting to buy units in Sydney.

      • If China crashes Sydney Will resemble the Gold Coast in the 80’s.
        I remember it well. Bargins everywhere as the Japanese sold out to recoup as much cash as possible, caused by their own domestic market collapse.

        • I hope so. I’d love the water at our beaches to be that little bit warmer.
          More seriously though, I am having trouble assimilating all these predictions for crashes. One day I’m told Sydney will follow Ireland. Next it is just like USA, then Spain, now Gold Coast.
          If a property spruiker makes a claim about one property going up because another one went up – it would be called as being ridiculous. Yet it seems that the same type of claim being made about property going down is OK.

          • Well it’s definitely a mugs game trying to predict this sort of thing. Keen had to walk because he got the upside wrong due to unexpectedly partisan govt action.

            Looking for comparisons with other cities is tricky, as each one is a bit different, so will crash/correct differently. Even within the city itself there’ll be variations, ie. I expect Sydney units to fall much more than houses, as they seem more overvalued.

      • Or they could simply move to Sydney. I remember there was a post about Factory owners disappear after unable to pay back debt.
        Won’t surprise me if they ended up living in Sydney.