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Building boom was the biggest ever; but it’s ending

Building boom ending. 

It’s been Australia’s greatest ever building boom, but the end of the boom is nigh.

Let’s take a run through the latest numbers released this morning in the usual three parts.

Part 1 – Housing starts drop sharply 41378319 L1 300x200

Seasonally adjusted housing starts fell sharply by 11 per cent to 50,395 in the March quarter, to be 19 per cent lower over the year, with unit commencements down by a thumping 29 per cent year-on-year.

When plotting the smoother trend figures the drop doesn’t look quite so dramatic, but nevertheless the downturn is underway.

Dwelling Commncement 1

The main driver of the drop has been Queensland, particularly Brisbane apartment starts which have dropped off a cliff since March 2016.

Dwelling Commncement 2

So it’s been a genuinely impressive run, but dwelling commencements are now resolutely pulling back.

Part 2 – Completions roll in

A unique feature of this construction boom has been the length of time it has taken for the flood of new apartment projects to be delivered.

However, completions are now starting to flow through nicely, with more than 223,000 completions over the year to March 2017.

Dwelling Completion

And there is still plenty more to come.

Part 3 – Apartment pipeline remains at large

There were still more than 215,000 dwellings under construction at the end of March 2017, including more than 152,000 attached dwellings.

Dwelling Under Consruction

Activity remains particularly high in Sydney, with more than 63,000 attached dwellings under construction across New South Wales at the end of the first quarter of the calendar year (and a massive 82,836 dwellings in total, an all-comers record).

Dwelling Under Consruction2

However, more than 40,000 approved dwellings have never been commenced, and nearly 20,000 of these are located in New South Wales.

Approved

The wrap – what goes up…

Overall, it can hardly be a huge surprise that the number of dwelling commencements has pulled back sharply over the year to March, particularly for apartments.

There is still a high volume of residential building work in the pipeline, however, while non-residential building approvals have now been trending higher for two years, which will go some of the way to plugging the gap.



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About

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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