The Australian Bureau of Statistics (ABS) released dwelling approvals data for March 2014 earlier this week.
Although the monthly reading recorded a fall, the trend of the data showed that the number of approvals is continuing to rise.
Total dwelling approvals fell by -3.5% (seasonally adjusted) over the month however, they are still 20.0% higher year-on-year.
House approvals fell by -0.5% over the month compared to a much larger -7.5% fall in the more volatile unit category. Year-on-year both houses and units have recorded a significant increase, up 19.1% and 21.3% respectively.
The month-to-month index is inherently volatile; as a result we prefer to look at the rolling annual number of approvals. Over the 12 months to March 2013, there were 188,153 dwelling approvals nationally.
This was the highest annual number of approvals since the 12 months to January 1995. Annual house approvals outweighed unit approvals with 104,598 and 83,554 approvals respectively.
House approvals are at their highest level since April 2011 while unit approvals are currently at an all-time high.
With interest rates currently set at low levels, population growth quite high and property values rising, developers are becoming more comfortable in seeking applications for new developments.
Of course this is just the approval stage and it will be interesting to see what proportion of these approvals actually make it to commencement in the near-term.
Across the individual capital city markets the annual number of approvals is also generally trending higher with record high approvals in some capitals.
Following is the annual number of approvals across the capital cities with the annual change in brackets: Sydney 38,436 approvals (35.7%), 42,231 (2.7%) in Melbourne, 19,566 (43.8%) in Brisbane, 8,264 (36.4%) in Adelaide, 24,375 in Perth (45.1%), 770 (5.8%) in Hobart, 1,637 (-23.7%) in Darwin and 5,157 (27.6%) in Canberra.
As you can see dwelling approvals are generally trending higher over the past year. In fact dwelling approvals over the year were at a record high level in Sydney and Perth.
In Melbourne dwelling approvals are at their highest level since November 2011, Brisbane approvals are at their highest level since July 2004, in Adelaide approvals are at their highest level since August 2011, Hobart approvals are at their highest level since January 2013, Darwin approvals are trending lower and Canberra approvals are at their highest level since February 2012.
The other interesting evolution of the market is the ongoing rise in prominence of unit approvals. The number of unit approvals is at a record high in both Sydney and Brisbane.
As a proportion of all dwelling approvals, more than 50% of all approvals over the past year have been for units rather than houses in Sydney, Melbourne, Brisbane, Darwin and Canberra.
Sydney has consistently approved more units than houses for the past 20 years and both Darwin and Canberra have approved more units than houses consistently since 2010.
The rising prominence of unit approvals in Melbourne and Brisbane is a relatively new phenomenon with unit approvals over-taking those of houses in Melbourne from August 2012 and in Brisbane from June 2013.
It is encouraging to see that dwelling approvals are trending higher nationally and across most capital cities. This is a desired outcome of low interest rates with the Reserve Bank hoping that a pick-up in dwelling construction can somewhat offset falling mining investment.
New dwelling construction also has a significant multiplier effect throughout the economy creating jobs and encouraging additional retail spending.
The main challenge will be that in many cities we are seeing an unprecedented level of units approved for construction. Certainly demand for units has risen over recent years however, the pipeline of approvals is at record levels which are not yet tested.
Obviously most developments will need a level of presale to trigger finance to commence construction and it will be interesting to see how many of these unit approvals actually make it to construction phase over the coming months and years.