With the ABS yesterday releasing its dwelling approvals data for the December 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 December 2016;
- Dwelling commencements to September 2016;
- Dwelling completions to September 2016; and
- Population growth to June 2016.
First, the national picture shows that dwelling approvals have fallen from recent all-time highs, whereas commencements have also retraced from record levels after playing catch-up. Completions surged recently as they have played catch-up with commencements, but they still remain way behind, thus suggesting there is still an unprecedented pipeline of dwellings currently in the construction phase. Meanwhile, population growth has picked up and is now above the GFC low:
Again, given that approvals and commencements are still close to record highs, and a massive gap exists between them and completions, the overall construction pipeline is huge and dwelling construction nationally will likely remain at boom-time levels for the rest of 2017 at least. The recent pick-up in population growth also mitigates somewhat potential oversupply risks.
Next is NSW, where after a decade of sluggish construction, approvals and commencements have lifted to unprecedented levels, although approvals are now just past their peak. Completions have also surged but remain well below commencements, thus suggesting a huge construction pipeline still exists. 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 near historically high levels; although the latter retraced in the latest quarter. Completions are yet to play catch-up with commencements, again suggesting a large construction pipeline exists. Population growth, however, has rocketed recently and is running at easily the highest level on record:
QLD continues to face a massive apartment glut. Although dwelling approvals have retraced significantly from recent highs (commencements to follow), completions are still way behind, again suggesting a massive pipeline of projects. By contrast, population growth has fallen significantly from mid-2000s levels, despite turning up a bit recently:
The construction cycle in WA continues to unwind abruptly. Approvals and commencements are way past their peak, whereas completions have only recently begun to retrace from record levels. 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 remains reasonably balanced at present, dwelling approvals and commencements have picked-up over recent quarters as population growth has crashed, whereas dwelling completions have slumped. This suggests an oversupply could develop in the near future, assuming completions play catch-up with commencements:
After a big increase in supply relative to population growth, construction continues to unwind in the NT. Supply has fallen back to earth although population growth continues to bounce around near zero. Overall, dwelling additions continue to easily outnumber population additions, suggesting any oversupply will worsen:
Finally, in the ACT, population growth is running just above the long-term average. However, dwelling construction is looking to accelerate with approvals rocketing and commencements and completions lagging way behind:
Nothing much has changed from the last time I compared this data. There are still massive gaps between dwelling approvals/commencements and completions nationally, driven by the major east coast markets of NSW, VIC, and QLD. In each jurisdiction, there is a huge pipeline of projects that have been commenced but are yet to be completed.
That said, VIC (Melbourne) has also experienced a big surge in population growth recently, which should help to mitigate any pending apartment oversupply.
NSW, like VIC, is experiencing strong population growth but also a big lift in construction (albeit off a much lower base). It also appears to have the largest pipeline of projects commenced but not yet completed. 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.
Elsewhere, housing gluts appear to be developing across QLD, WA, the NT, SA, and the ACT, although they are at different stages of the cycle.
With approvals nationally only recently retracing from record levels, and the long (2+ year) lag time between highrise approvals and completions, the dwelling construction boom will likely run hot for the rest of this year and possibly into early 2018.
