The latest dwelling approvals data from the ABS shows that unit & apartment approvals are running 54% below their June 2016 peak, after collapsing by 31% over the past year alone:
The situation is equally dire for high-rise approvals, which have collapsed across the three major markets, down by 54% (NSW), 58% (VIC) and 70% (QLD) from their respective peaks in rolling annual terms:
Not surprisingly, BIS Oxford Economics has projected that high-rise apartment completions won’t bottom-out until 2021-22, with Sydney and Melbourne high-rise completions still to fall by 57% (Sydney) and 38% (Melbourne) from 2018-19 levels:
This looks about right to us, given there is typically a two-year lead time between when high-rise apartments are approved until they are completed. Growing buyer concerns around build quality and flammable cladding is also dampening demand.
Thus, even though dwelling values have bounced, there is unlikely to be any broad-based transmission into dwelling construction for several years, owing to the insensitivity of high-rise apartments to changing demand.
The dwelling construction bust is baked in.