This is the end of the building boom

The building approvals boom is fading.

Today’s Building Approvals data revealed the expected rebound in February after the seasonal lull in January, but the downtrend is clearly in place from the trend peak of 11 months ago.


House approvals have rolled a little, but the tailing off is more likely to be seen in the units, apartments and townhouses sector following an impressive burst since 2012.


Capital city analysis

House approvals are faading fast in Perth in reaction to elevated vacancy rates, while Melbourne continues to approve the greatest number of houses by some margin, and as such may be the city with the greatest potential for overbuilding.


The last couple of months have been much slower for unit approvals in Sydney and Melbourne, which is now being reflected in the rolling annual figures below.

After nearly a decade of under-building Sydney is now approving a decent number of attached dwellings.


Dream over for high rise

This record approvals boom for Australia has largely been driven by “high rise” or four plus storey unit blocks, but this part of the approvals boom has noticeably slowed over the past four months.


Sydney, Melbourne and Brisbane have each gone hard at approvals in the high density sector over the past few years, but all three cities have now passed their respective peaks.

The wrap

With APRA having insisted upon tigher lending criteria for investors building approvals will in all likelihood continue to slow from here, following a record run.

Even at this well advanced stage in the construction cycle vacancy rates have been tightening in inner Sydney to just 1.3 per cent, but cracks are starting to show in some of the secondary and outer areas where vacancy rates are above 2 per cent (and in some pockets higher again).

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Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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