Apartment surge drove dwelling approvals higher in November

By Leith van Onselen

The Australian Bureau of Statistics (ABS) has just released the Building Approvals data for the month of November. At the national level, the number of dwelling approvals rose by a seasonally adjusted 2.9% to 13,307, driven predominantly by a 10.1% increase in approvals for private sector units and apartments. Consensus was for a total rise of 3.0%.

The prior month’s approvals were also revised upwards by 3.1%, from 12,540 to 12,932.

In the year to November 2012, dwelling approvals rose by a seasonally-adjusted 13.2%. The key figures are provided in the below table:

A chart showing the time series of seasonally-adjusted dwelling approvals at the national level is provided below, split-out by detached houses and units & apartments:

As you can see, dwelling approvals nationally were trending down since early 2010, but received a large boost in May and June when the number of unit & apartment approvals bounced. This unit and apartments boom retraced momentarily before rising once more.

Monthly dwelling approvals are now running in-line with long-term average levels, as shown by the below chart. However, they remain fairly depressed in population-adjusted terms, given that Australia’s population has grown by more than 40% over the past 30-years.

The below chart shows the time-series of approvals at the state level.

This month’s rise in dwelling approvals was driven by Victoria, where approvals rose by 9% (+355). The ACT (+99% or +243 dwelling units) and the NT (+138% or +94 dwelling units) also experienced big increases, whereas approvals in New South Wales (-4% or -133 dwelling units) and South Australia (-14% or -112 dwelling units) fell significantly over the month.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Latest posts by Unconventional Economist (see all)

Comments

  1. GunnamattaMEMBER

    Yeah, that apartment construction surge in Victoria (or shall we just call it Melbourne) is coming at just the right time. Cant wait for them to come on the market for all the new buyers who were there for the november sales data, and to fill the gap in the reduced stock on market data.

    • Go the Vics.

      Surging new dwelling approvals and construction, all time low new dwelling sales. Falling stock on market. Prices edging up.

      Go figure.

      • Very little of this stock adds to local supply. You need to ask the Chinese where it is! It shows up in the approvals and median price data, but you’ll find relatively very little entering the local rental/sales sphere.

        • Does anyone have some reports or stats which show this? These new apartments have to go somewhere even if they are all sold to chinese investors it still stops those same chinese investors from buying the existing local supply.

  2. Chart 1 is very interesting. The gap between Houses and Units & Apartments has perceptably closed and I expect will continue to close. We will be building more mult-unit dwellings than detached houses possibly within just a few years!

    • It’s a decade’s worth of strategies (that according to many mainstream commentators have failed – oh how wrong they are/were) bearing fruit at last.

      Check out CoM’s Transforming Australian Cities report : http://www.melbourne.vic.gov.au/AboutMelbourne/Statistics/Documents/TransformingCitiesMay2010.pdf

      Highly specific on the City of Melbourne’s LGA, but if you look closely at any new project in areas like Moonee Valley, Darebin, Stonnington and Port Phillip these principles are being applied when projects are approved.

      One of the key issues that needs to be overcome is for banks to realise that 50sqm for a one-bed unit is nothing new (ro scary to lend against) and many have existed since the 1960s (any number of the walk up flats all around the inner and middle ring of the city: Brunswick, Footscray, Fitzroy, St Kilda, Caulfield, Hawthorn etc are being bought up and renovated and a 1 bed is gernally in the 50-55sqm range from that era) and when you look at this:

      Number of detached dwellings (2011):

      Sydney: 926,062
      Melbourne: 1,039,341

      Number of flats, units or apartments (2011):

      Sydney: 391,869
      Melbourne: 126,595

      It’s not hard to see why the sprawl-belt is overbuilt (huge vacancy rates in Point Cook et al) and why the inner-city is really coming into its own – its been a long-hard slog by Rob Adams and the guys at City of Melbourne (3 decades so far) but they’ve created an environment where the city is in demand, not just for office accomodation, but residential – and its going to spread well into the inner and middle ring of suburbs this decade and beyond – we’re only at the beginning of the transformation!

  3. Would appear NSW has some way to go to match 2002 DA approval levels.
    I remember the 2004 NSW market peak well,assume 2 yr build, that’s when i bought my inner Sydney apartment….memories!!!

  4. This data supports the bearish on Melbourne, as new houses continue to be constructed whatever under supply previously existed will continue to be a thing of the past.

    If there is any supply/demand mechanics left in the Melbourne property market at all then we should see some fall’s coming in 2013, especially in apartments which there seems to be a glut of at the moment.

    • 2 Apartment buildings near me have been plagued by poor trade finishes and have never been completely occupied.

      In fact since they were completed 2 or so years ago I have always seen FOR SALE signs and numerous FOR LEASE signs up out front.

  5. If units are say 1200sm and houses are 2200sm (both estimated averages) and the mix is moving consistently to units, what does that say about numbers employed in the housing construction industry and also the amount of furniture, appliances and furnishings to be bought?

    Looks to be a slow grind against construction and housing related retail employment.