OK so the ABS Building Activity data series doesn’t quite run back to 1788, but take a Captain Cook at this:
Dwelling completions have surged to their highest ever level with more than 186,000 homes completed over the past year.
Furthermore there are presently some 184,000 dwellings under construction, which is the highest number in Australia’s history.
Many pundits scoffed at the Reserve Bank’s plan to stimulate construction, but prices are rising and supply has responded with a vengeance, despite inflation in the cost of trades and materials.
As the largest cities have become denser over time, this construction cycle has largely been a story of units, townhouses and apartments – the “attached dwellings” sector.
Building work done
It should be acknowledged that in spite of all the numbers that are being thrown around in relation to record home starts, record completions and record dwellings under construction, the residential construction boom has likely now nudged against its peak.
Despite being higher over the year the value of new residential building work done slipped -3.4 per cent lower in the June quarter to $12.8 billion, although the resi sector was held up to some extent by a long overdue +4.0 per cent surge in major renovations work.
There has not been much to shout about from the non-residential sector since the financial crisis stimulus.
At the state level the economies of the most populous states have benefited from a building boom, but the value of building work done appears to have peaked, albeit remaining at a historically high level.
Dwelling completions by state
Where are new houses coming online? Mainly in Victoria with more than 31,000 houses completed over the past year.
As for units and apartments there has been a strong completion rate across most of the larger states, with Victoria again leading the way in completing nearly 25,000 units over the past year.
Although it will be the topic of a separate blog post, these figures show why the “Sydney oversupply” meme has been wide of the mark.
The above charts represent state level figures, and it is clear that the supply of new units and apartments has ramped up impressively over the past four years.
But despite the improvement, total dwelling completions in New South Wales of 144,000 dwellings is barely keeping pace with a population which has surged by close to 400,000 over that time, while this follows on from a weak half decade of completions in the harbour city which ran from 2005.
After accounting for stock obsolescence and demolitions, the thousands of apartments which are left vacant, and the fact that close to half of new dwellings in NSW over that time have been units (which typically house only provide accommodation for a couple)…well, there’s not much overbuilding in aggregate to be found in those numbers, even if the rentals market is now fully supplied.
It is much more difficult for a growing city with a population the size of Greater Sydney (approaching 5 million) to overbuild housing than it is for a city the size of, say, Belfast, although Melbourne is certainly giving its best shot.
For all that, there are of course plenty of sub-regions around Australia with localised oversupply, and particularly so the case of higher-density dwellings.
Commencements peak at record high
Total commencements have increased by +14 per cent over the past year to a new high of nearly 210,000.
It was another strong quarter in June, but the 53,314 commencements result was below that of two of the preceding three quarters, and it is forecast that commencements will now decline through 2015/16.
Finally, there are 184,000 dwellings under construction at the present time, which is the highest figure in Australia’s history.
This should keep the residential construction sector operating at or close to its full capacity for some time to come.