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Building approval trends in cities – behind the headline number - featured image

Building approval trends in cities – behind the headline number

The number of building approvals is generally viewed as an indicator of the state of the economy, and hence is one of the more important data sets released by the ABS.

Building Approval2Approvals are linked to construction activity, jobs and the flow-on effects to the rest of the economy.

Recently I had a conversation with someone who expressed concern at the decline in building approvals, suggesting it was a precursor to an economic recession.

Now I'm not an economist by any stretch of the imagination, but surely it's more than just the number?

Residential building approvals

This blog considers the number of residential building approvals by SA3 in Australia's major cities since 2011-12.

SA3s generally approximate LGAs in urban areas, and the ABS provides a handy monthly time series going back to 2011 through ABS Stat.

I classified state capital SA3s into inner, middle and outer, depending on their location as well as their role and function.

For instance, areas more distant from the CBD with numerous greenfield development fronts were classified as outer.

This provided a simple means of making sense of the approvals according to geographic location.

The number of residential building approvals in Australia increased from 149,300 in 2011-12 to 238,140 in 2015-16.

Between 2015-16 and 2017-18 the number of residential approvals exceeded 200,000 nationwide.

However in 2018-19, the was a decline of 20%, with a total of 187,760 residential approvals.

Although this decline was steep, it's worth pointing out that this came after four years of residential approvals exceeding 200,000 each year.

These were unprecedented amounts and it remains to be seen if the decline in 2018-19 represents a long term trend, or simply a market correction.

Geography matters

The drivers of residential building approvals are very different across metropolitan areas.

In most inner city areas, residential building approvals are comprised of larger projects such as multi-storey apartment buildings.

map-location-area-suburb-geography-place-landSome of these comprise hundreds of dwellings.

They take many months (if not years) to complete, and often require significant capital even before the first sod has been turned eg pre-sales.

As a result, there is often a gap between the initial approval appearing in the data, and the completed building ready to house its first residents.

The size of these projects also means that create a "lumpiness" in the data when viewed over time because they are generally not approved every month or quarter.

This is discussed in more detail below.

In contrast, separate houses are more the norm in outer suburban areas.

New housing estates tend to cater for first home buyers and young families, with larger houses on separate lots.

The gap between the approval and the completed house is much shorter - some smaller houses may only take six months to build.

There are also fewer examples of large scale apartment blocks being approved in outer suburban areas, so trends over time are not as lumpy as inner city areas.


The graph below shows the number of residential building approvals across inner, middle and outer Melbourne from 2011-12 to 2018-19.

MelbourneIt clearly shows that there was a steep decline in the number of residential approvals in 2018-19 when there was a total of 47,250 compared to 62,880 in 2017-18.

But there's an interesting story behind these numbers.

Back in 2014, the then Victorian Planning Minister, Matthew Guy, approved over 2,000 new apartments across five projects in one day, aka Super Tuesday.

Building approvals data confirms that this was the peak year for approvals in Inner Melbourne, with 19,540 approvals in 2014-15.


Much as Super Tuesday was extraordinary in number and subsequent impact on the CBD skyline, the numbers were dwarfed in November 2017 when there were 4,350 residential approvals in Inner Melbourne ie in one month alone.

More than 3,300 of these were in the City of Melbourne, yet the following month there were less than 10 approvals.

This provides an example of the lumpiness of residential approvals in inner city areas where large projects dominate the market.

BuildingFurthermore, it highlights that this volume of residential dwellings approved is the exception rather than the rule, so trends need to be viewed in that context.

As mentioned above, there can be a gap of several years before large apartment blocks are completed.

With reference to the Super Tuesday approvals, Google Street View confirms that all but one had been completed by the end of 2017 ie more than three years later.

Most of the decline in 2018-19 was driven by trends in the inner city, but there were also declines in middle and outer Melbourne as well.

Of note however was that approvals in the rest of Melbourne reached record highs in 2017-18, such that the 2018-19 figures are still some of the highest on record.

For instance, outer Melbourne recorded 22,730 approvals in 2017-18, and this declined to 20,180 in 2018-19.

This was still 35% higher than the 2011-12 figure of 14,840.

Whether this decline will continue in 2019-20 and beyond remains to be seen.

Monthly data released by the ABS to November 2019 suggest that there could be another decline if these more recent trends are sustained.


Perth's housing market is significantly different to Melbourne's, in that demand for new housing is driven by the fortunes of the mining sector - a bit like the fluctuating population growth rate.

Perth does have a growing inner city population but the number of new apartments is largely confined to the CBD, with smaller clusters in places such as South Perth, Burswood and Subiaco.

The graph below shows the number of residential building approvals in Perth since 2011-12.


The main point of interest is that the peak number of residential approvals occurred in 2014-15 (28,500).

This was three years prior to the Melbourne 2017-18 peak and it also coincided with the downturn in the mining sector.

PerthThe decline has been steady since 2014-15 across all sectors in the metropolitan area.

It has been more pronounced in inner Perth, where the 2018-19 approvals were about one-quarter of the 2014-15 figure.

Many of the projects approved at this time have never been built, victims of low demand in a sluggish economy.

Of course, it's possible that these projects will become viable again in the future - when remains the big question.

Notable trends elsewhere

Hobart and Canberra were the only cities where the number of residential approvals did not show a decline in 2018-19.

In fact, in both cities approvals have steadily risen over the past few years, albeit from a smaller base.

In Canberra, there were 6,390 residential approvals in 2018-19, a 31% increase on the 4,860 approvals in 2011-12.

Canberra2Most of this increase has been in the inner and middle parts of Canberra, whereas approvals in outer Canberra have been more volatile in the last decade.

Increased population growth in Tasmania, particularly Hobart, has been well documented in recent years.

This has corresponded with an increase in residential approvals.

In 2018-19, the number of residential approvals was 1,410, about double that recorded in 2011-12.

All sectors in metropolitan Hobart have recorded an increase in approvals, and this is evident in new estates on the northern and southern fringes, as well as more recent medium density developments in established areas.


The number of residential building approvals fell sharply in 2018-19, dropping below 200,000 for the first time in four years.

Building ConstructionHowever this decline was on the back of extraordinarily high figures, and it also played out differently across Australia, and within our major cities.

The 187,760 approvals in 2018-19 were still higher than the 149,300 recorded in 2011-12.

An examination of trends in inner Melbourne and Perth reveals that numbers are highly volatile due to the size of projects.

Moreover, there is a time lag between approval and completion, and in the case of Perth, a more depressed market has meant some projects were never constructed.

It's possible that the decline in 2018-19 was a market correction rather than the beginning of an economic downturn, though more recent data suggests that the number of approvals might be lower in 2019-20.

Regardless, placing these trends in perspective, as well as how they play out spatially, should also be considered.

About Simone Alexander is a demographic consultant with more than 20 years of experience working in both the public and private sectors. She uses her expertise to blog about demographic trends, housing and planning issues in Australia’s cities and regions.
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