Following Tuesday’s dwelling approvals data for the June quarter, it’s time once again to plot Australia’s various measures of dwelling construction against population growth, namely:
- Dwelling approvals to June 2019;
- Dwelling commencements to March 2019;
- Dwelling completions to March 2019; and
- Population change to December 2018.
First, the national picture shows that dwelling approvals and commencements are crashing, whereas completions are yet to follow. By contrast, population growth rose to 405,000 in the 2018 calendar year:
Clearly, based on this data, dwelling construction nationally is facing an epic bust. The crash in approvals points to heavy falls in both commencements and completions into 2020, with associated heavy job losses.
Next is NSW, where after lifting to unprecedented levels approvals have collapsed with commencements following behind. Completions have just peaked, whereas population growth has risen once more:
In VIC, both dwelling approvals and commencements are also crashing, whereas completions are still to peak. Population growth remains turbo-charged, albeit has moderated:
In QLD, dwelling approvals and commencements are crashing, with completions lagging behind. By contrast, population growth into QLD continued to rise in the December quarter:
WA’s construction bust continues in earnest. While approvals, commencements and completions all continue to crash, whereas population growth has rebounded after crashing recently; albeit remains at very low levels:
SA’s housing market was headed into oversupply, although the situation could be changing with population growth accelerating just as dwelling approvals and commencements are tanking:
To summarise, while the housing market has hit oversupply following the plethora dwelling completions, the collapse in both dwelling approvals and commencements suggests that a major construction bust is on the cards that will likely continue through 2020 and impact all major markets.
This bust should lead to heavy job losses, as well as tighten rental vacancies into 2020, given population growth is accelerating.
Other things equal, this also points to higher rents down the road; although this will also depend on what happens to wage growth and unemployment, since you cannot leverage rents.