New dwelling starts are, well…starting. Approvals are near all time highs. Actual commencements are on the rise.
The Australian economy is now at a stage where offsets to the downturn in mining capex are starting to come through.
It’s great news (for now).
- New dwelling approvals are close to a high point in Australia. Dwelling commencements totalled 165,000 last year. They are expected to reach 180,000 during 2014. This is much higher than the 150,000 annual average over the last seven or so years. This lift in new housing starts – my boffin friends tell me – will add significantly to the country’s economic growth. In short, more jobs.
- The lift in new housing approvals is across most states & territories. Victoria is coming off a very high base. Tasmania has little need to build much, given its low population growth. Lovely place, yet poor as bat-shite.
- One chart that reads best if the lines head down is our ‘dwellings yet commenced’ graph. The lines are now heading in the right direction. Only one in ten detached houses approved across Australia have yet to start construction. This ratio is one in five for apartments & townhouses. These ratios are dropping. All smiles.[sam id=37 codes=’true’]
- It takes, on average, about three months from approval to start building a detached house in Australia. About five months for a townhouse; nine months for walk-up flats & 18 months for mid-to-high-rise apartments. Sadly, it takes years, more often than not, to actually get a new development approval. But enough whinge.
- Dwelling prices are on the rise, up 10% over the last 12 months. Australia’s two largest cities are mostly driving this growth.
- House price growth – despite Harry Dent’s recent efforts – is not showing any signs of slowing down. And really, why would it? Strong population growth; very low-interest rates; (so far) an undersupply of stock & an expectation of further house price appreciation are fuelling demand. Yes, I do think that there is an element of ‘irrational exuberance’ now taking hold in Sydney & even Melbourne. It may even find its way up north to SEQ by the end of this year. We haven’t had a party up this way for yonks & we look forward to a bit of cheer.
- Until new dwelling supply now starts to respond – i.e. dwelling commencements rise in line with approvals – then upward pressure on dwelling prices will remain whilst interest rates are low.
- An increase in new dwelling supply is now coming. Given this trend, interest rates are now likely to remain steady.
History has a way of repeating – hence there is a property cycle – and this coming lift in new housing supply (which is great for job creation & actually housing people) will most likely peak when interest start to rise.
These twin lifts will see the housing market soften. But for mine, that is some 18 to 24 months away. And the ‘soft’ should be nothing like a fall of 30% to 50%!
STATS: Our quick grab of the recently released property-related statistics.
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