After months of declining dwelling approvals, the trend appears to be shifting positively.
In fact, the latest data from ABS show that dwelling approvals rose a sharp 18.5% month on month in December, rebounding after the previous month’s 8.8% fall.
The rise was driven by the very volatile apartment series (+56.6% month on month after last month’s -21.8% month on month), while detached houses fell (-2.3% month on month after last month’s -2.5% month).
Tapas Strickland, Head of Economics Research at NAB commented:
"Although total building approvals are still lower in year-on-year terms at -3.8% year on year (detached house -11.7% year on year; apartments +2.9% year on year), some stability has started to emerge in levels term with the 3 million annualised run rate for approvals running at 183,000
This is broadly similar to the pre-pandemic run rate of 180,000, but still well down from the stimulus-induced peak rate of 258,000 in May 2021."
The sharp fall in dwelling approvals seen since the peak in 2021, has been occurring when population growth is recovering strongly.
Over the past year, the population aged 15 years plus has increased by 436,000, compared to 189,000 dwellings being approved.
Taken as a ratio, the number of new people per building approval is at 2.3, the highest since 2009, well above the long-run average of 1.5.
According to Tapas, "the favourable population backdrop should see ongoing demand for dwellings in Australia, particularly apartments."
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He further commented:
"Given lags in adding new residential supply, it is likely to underpin strength in residential rents and keep vacancy rates low, even as dwelling prices fall due to reduced borrowing capacity from higher interest rates.
A sharp reduction in household size (the number of persons per household) during COVID and significant changes to interstate migration are also important factors in low vacancy rates currently.
The extent to which these changes persist will also be important for many housing and construction markets, particularly for regional areas and in the smaller capital cities."
By state, the surge in dwelling approvals occurred in NSW, particularly VIC, with the ABS noting:
“The result was driven by a number of large apartment developments approved in New South Wales and Victoria”.
These states account for the bulk of migration flows each year.
Total dwelling approvals rose in NSW (+48.4% month on month), VIC (+20.7% month on month), QLD (+8.3% month on month), WA (+6.4% month on month), but fell in SA (-24.6% month on month) and TAS (-49.7% month on month).
Source of charts and commentary: ABS NAB