Dwelling approvals continue to trend lower but remain at elevated levels

The Australian Bureau of Statistics (ABS) released building approvals data for June 2016. Diversity Housing

Over the month there were 18,693 dwellings approved for construction nationally.

National dwelling approvals are currently 26% higher than the decade average.

Although this represents a very high volume of approvals, it was -2.9% lower over the month, -5.9% lower year-on-year and the lowest monthly number of approvals in seven months.

Dwelling approvals reached a record-high in May 2015 and in June were -11.8% lower than the 21,201 approvals in May 2015.


Looking at the split between house and unit approvals highlights that both property types recorded falls in approvals in June 2016.

In June 2016 there were 9,514 houses and 9,179 units approved for construction nationally.

House approvals fell by -2.4% over the month, are -5.5% lower year-on-year and are -11.7% lower than their recent monthly peak in April 2015.

The 9,179 unit approvals in June represented a -3.4% monthly fall and a -6.3% year-on-year fall while unit approvals are -21.1% lower than their record-high in May 2015.

Although approvals have eased over recent months, on a historic basis they remain at extremely high levels.

House approvals are currently 7% higher than the decade average while unit approvals are 56% higher.


Houses remain the dominant type of dwelling approvals, accounting for 55.6% of approvals in June 2016. 

Unit approvals data is further split into: townhouses, low-rise and high-rise approvals. 

In June 2016, 13.9% of approvals were for townhouses, 3.6% were for low-rise units and 27.0% were for high-rise units.

The chart highlights that over recent years there has been a decline in the proportion of house approvals while high-rise unit approvals have seen an increasing prevalence.

More recently there has been a fall in the proportion of high-rise unit approvals following a peak of 38.9% of total approvals in May 2015.

This is likely to be due to tightened lending policies resulting in an easing demand from the investment segment which has been a prime source of demand for high-rise unit developers.


Across the combined capital cities, the number of dwelling approvals has fallen over each of the past two months.

The above chart shows the six month average monthly number of dwelling approvals in each of the capital cities nationally.

The chart highlights the magnitude of the recent boom and that approvals are now starting to trend lower across most capital cities.


In terms of capital city house approvals, most cities are now seeing a downturn in approvals.

Melbourne, which has historically approved many more houses than all other capital cities, Sydney and Brisbane have seen a recent up-tick in house approvals.

Despite the overall climb in total approvals over recent years, Perth is the only capital city in which house approvals have hit record highs over the past five years.

Melbourne stands out as delivering the largest detached housing pipeline with no discernible downwards trend emerging.


The number of units approved for construction is now beginning to fade across the capital cities.map australia country population state house property vic qld nsw tas wa nt

It is important to note that in Sydney, Melbourne, Brisbane and Perth unit approvals have recently reached historic high levels, highlighting the booming unit construction activity.

To put this into some context, over the past year 69.5% of all Sydney dwelling approvals were for units while in the other cities the figures were: 54.7% in Melbourne, 62.5% in Brisbane, 38.6% in Adelaide, 31.3% in Perth, 20.1% in Hobart, 50.2% in Darwin and 76.9% in Canberra.

Five years ago the proportion of total approvals that were for units in each city was recorded at: 63.4% in Sydney, 48.8% in Melbourne, 42.3% in Brisbane, 31.8% in Adelaide, 17.6% in Perth, 33.1% in Hobart, 61.1% in Darwin and 68.5% in Canberra.

In Melbourne, Brisbane and Perth in particular there has been a significant shift in approvals towards units and away from houses over the past five years.

Just because a unit is approved for construction doesn’t necessarily mean that it will get constructed.

Historically about 98% of houses approved for construction get completed compared to about 85% for units.house inspect search magnify property market neighbour

With record-high levels of construction underway along with a record-high number of houses and units approved but not yet commenced, it is reasonable to expect that an increasing proportion of properties approved for construction, particularly units, will not be built.

The tighter lending policies, particularly to investors and offshore buyers, is likely to make new unit construction more difficult to commence.

This is due to a likelihood that achieving a level of presale which allows construction to commence will become increasing difficult with fewer investors and offshore purchasers.

Over the coming months it is anticipated that new dwelling approvals will continue to trend lower as we have seen over recent months.

Despite an expectation of a decline in approvals, we expect that on an historic basis approvals will continue to remain elevated.

Units in particular, will likely see a greater fall than houses due to the risk profile associated with developing numerous properties in a single building as opposed to single detached houses which are historically much more likely to end up being completed.

Want more of this type of information?

Cameron Kusher


Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au

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