Earlier last week the Australian Bureau of Statistics (ABS) released their building activity data for the March 2018 quarter.
The release includes data on dwelling commencements, dwelling completions, dwellings under construction and dwellings that are approved for construction but not yet commenced.
Based on seasonally adjusted data there were 57,112 dwelling commencements nationally over the March 2018 quarter.
This figure consisted of 30,788 new house commencement and 25,969 new unit commencements with the remaining 355 commencement non-new dwellings.
House commencements were 3.0% higher over the quarter and 13.4% higher year-on-year.
Unit commencements increased by 8.8% over the quarter and 6.5% year-on-year.
Commencements have fallen from their peak however, approvals remain well above long-term average levels so expect commencements to remain elevated for some time.
State data is published in a raw basis (non-seasonally adjusted) and the data shows a fall in house commencements across the board.
Unit data was a bit of a different story with commencements falling in most states however, increases were recorded in Vic and SA.
In fact the 11,883 unit commencements in Vic was an historic high and was 64.9% higher over the quarter to be 29.4% higher than the previous record-high.
Over the first quarter of 2018 there was 53,782 dwelling completions on a seasonally adjusted basis.
These completions were split between 28,184 new houses and 25,145 new units (the remaining 453 completions were of dwellings that weren’t new).
New house completions increased by 1.9% over the quarter however, they were -1.5% lower year-on-year.
New unit completions increased by 7.4% over the quarter although they were -9.3% lower year-on-year.
Although completions appear to have moved through their peak with a big pipeline of work still under construction they are expected to remain elevated for some time.
Based on raw data, house approvals were lower over the quarter in each state and territory except for WA.
There were particularly large falls in house completions in NSW (-26.4%), Vic (-18.9%) and Qld (-26.5%).
Unit completions recorded large falls in most states and territories however, in NSW the 10,529 unit completions was an historic high.
Unit completions in Vic (4,985) were the lowest they’ve been since the March 2014 quarter, the 3,142 unit completions in Qld was the fewest since the June 2014 quarter and the 820 completions in WA was the fewest since the June 2013 quarter.
At the end of the March 2018 quarter there was a record-high 227,010 dwellings under construction nationally.
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The number of dwellings under construction was split between 69,639 new houses, 155,275 new units and 2,096 dwellings that weren’t new.
Interestingly, none of these three categories had the number of dwellings at an historic high however, both new houses and new units recorded an increase in the number under construction over the quarter.
The volume of stock currently under construction is well above the decade averages recorded at 61,409 new houses and 97,822 new units.
With a record high volume of stock under construction nationally, this will likely result in an elevated number of completions over the coming quarters.
Across the individual states and territories, the number of new houses under construction rose in each state and territory except for WA.
In fact the 23,804 new houses under construction in Vic at the end of the quarter was a record high.
Looking at units under construction, the number fell over the quarter in NSW, WA, Tas and ACT while rising elsewhere.
After hitting a record high last quarter, there was a slight fall in the number of units under construction in NSW while in Vic and Qld the number of units under construction had consistently been falling for a number of quarters but each state recorded a lift over the quarter.
The rebound in Victorian unit construction is substantial, offsetting the previous decline to reach a new record high over the March quarter.
To put the number of units under construction in NSW, Vic and Qld in perspective, there are currently 66,054 units under construction in NSW compared to a decade average of 35,254, the decade average in Vic is 30,827 compared to 48,971 currently and in Qld there are currently 22,905 units under construction compared to a decade average of 17,375.
The number of dwellings approved for construction but not yet commenced has eased slightly over the quarter from a record-high 45,885 at the end of 2017 to 41,818 at the end of the March 2018 quarter.
With the number of dwelling approvals off their peaks but remaining elevated it seems likely that the number of dwellings approved but not yet commenced will remain high.
Especially given that finance for new projects is reportedly tougher to source, pre-sales for off the plan apartments have slowed, credit remains tight, foreign buyer numbers are down substantially and dwelling values are now falling in some of the larger housing markets.
Across the individual states and territories, NT was the only region in which the number of houses approved but not yet commenced increased over the quarter.
For units it was a much different story with the number approved but not commenced lower over the quarter in Vic, SA and NT but higher elsewhere.
NSW was the real story with a near historic high 17,455 units approved but not commenced, accounting for 55.1% of all units approved but not yet commenced nationally.
Although at a national level residential construction work is winding down, some sectors and regions are continuing to see record levels of dwellings under construction and most regions continue to see new housing supply tracking at above average levels.
Off-the-plan apartment markets are likely to remain in the spotlight, with the risk profile remaining elevated due to high stock levels against a back drop of significantly reduced investment activity, fewer foreign investors purchasing properties, low rental yields, falling values and tight credit.
Strong population growth and low interest rates will, at least to some extent, support absorption, however investment grade unit stock is likely to remain a risky proposition over the short to medium term.
Furthermore, developers of new housing stock are likely to see a slower rate of sales over the short to medium term given all of the factors detailed above.