With the ABS yesterday releasing its population data for the June quarter, it’s an opportune time to once again examine how dwelling construction is tracking against population growth at the national and state and territory levels.
The below charts track the following, which are based on the latest available quarterly data:
- Dwelling approvals to September 2016;
- Dwelling commencements to June 2016;
- Dwelling completions to June 2016; and
- Population growth to June 2016.
First, the national picture shows that dwelling approvals are levitating near all-time highs, whereas commencements have rocketed as they played catch-up. Completions also surged in the June quarter as they played catch-up with commencements, but still remained far behind. Meanwhile, population growth has picked up and is now above the GFC low:
Given that approvals and commencements are near record highs, and the massive gap between them and completions, the overall construction pipeline is huge and dwelling construction nationally could remain at boom-time levels into 2018. But the recent pick-up in population growth mitigates somewhat potential oversupply risks.
Next is NSW, where after a decade of sluggish construction, approvals and commencements have lifted to unprecedented levels. Completions also surged in the June quarter but remain well below commencements. Population growth is also holding at an elevated level and has even strengthened a bit recently:
In VIC, which has long been the construction leader, dwelling approvals and commencements are both levitating at historically high levels. Like NSW, completions surged in the June quarter but remain miles behind. Population growth, however, has rocketed and is running at easily the highest level on record:
Queensland continues to face a massive apartment glut. While dwelling approvals and commencements have begun to taper, completions are still way behind, suggesting a big pipeline of projects. By contrast, population growth has fallen significantly, despite turning up recently:
The construction cycle in Western Australia continues to unwind. Approvals and commencements are well past their peak, whereas completions have only just peaked, suggesting that actual construction levels are falling. Meanwhile, population growth continues to crash through the floor, suggesting the supply-demand imbalance in Western Australia will continue to get worse and remain in oversupply for a long time yet:
While SA’s housing market is reasonably balanced at present, dwelling approvals and commencements have just picked-up as population growth has crashed, whereas dwelling completions have slumped. This suggests an oversupply could develop in the near future:
After a big increase in supply relative to population growth, the worm has turned somewhat for the NT. Supply has fallen back to earth although population growth continues to bounce around the bottom. Overall, dwelling additions continue to easily outnumber population additions, suggesting further oversupply ahead:
Finally, in the ACT, population growth is running just above the long-term average but so is dwelling construction, with completions soon to play catch-up with commencements:
The one thing that has changed to the outlook following the latest dwelling approvals data relates to Victoria (Melbourne), where the big surge in population growth should help to mitigate to some extent the pending apartment oversupply.
Elsewhere, housing gluts appear to be developing across QLD, WA, the NT, and SA although they are at different stages of the cycle.
New South Wales’, like Victoria, is experiencing strong population growth but also a big lift in construction (but off a much lower base). Approvals and commencements are at record highs, whereas completions are lagging by a large margin. It could take several years until the dwelling construction boom is done by which time Sydney’s much vaunted “housing shortage” will likely be consigned to the history books.
