Dwelling supply to fall way behind population growth

With last week’s release of dwelling approvals data for the September quarter, it’s once again time to examine how Australia’s dwelling supply is tracking against population growth.

The below charts track the following, which are based on the latest available quarterly data:

  • Dwelling approvals to September 2019;
  • Dwelling commencements to June 2019;
  • Dwelling completions to June 2019; and
  • Population change to March 2019.

First, the national picture shows that dwelling approvals are crashing hard with commencements following behind. Completions have also just peaked, whereas population growth was strong at 388,800 in the year to March 2019:

Overall, dwelling construction is facing an enormous bust at the same time as population growth continues to run rampant.

Next is NSW, where after lifting to unprecedented levels, approvals are also crashing at an alarming rate with commencements following. However, completions have just peaked, whereas population growth remains strong:

It’s a similar story in VIC, where dwelling approvals are collapsing with commencements following. By contrast, completions look to have peaked in the June quarter, whereas population growth is still turbo-charged, albeit has moderated slightly:

In QLD, the dwelling construction bust is further advanced. Approvals and commencements have both collapsed, with completions following. By contrast, population growth into QLD has risen strongly over recent quarters:

The construction cycle in WA continues to unwind abruptly with approvals, commencements and completions all collapsing. Meanwhile, population growth has rebounded after crashing recently; albeit remains at very low levels:

SA’s housing market was headed into oversupply. However, the situation is changing with population growth accelerating just as dwelling approvals and commencements have fallen:

To summarise, while the housing market hit oversupply recently as the plethora of homes were completed, the epic collapse in dwelling approvals followed by commencements suggests that construction will bust from now into 2021.

Other things equal, this points to higher rents in the future; although this will also depend on what happens to wage growth and unemployment, which will be hit hard as construction jobs retrench:

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