Dwelling completions boom as population growth slows

Recent Australian Bureau of Statistics (ABS) data shows the strong national population growth experienced over recent years is continuing to wane while on the other hand, dwelling construction is booming.

This effect is creating a much closer relationship between housing supply and demand.australia

ABS demographic data released last week for December 2015 showed that Australia’s population is now estimated at 23.9 million people; this increased by 326,073 persons over the 2015 calendar year.

Annual population growth fell substantially from a peak of 459,504 persons over the 12 months to December 2008.

While we’ve seen population growth and demand for housing slow down, dwelling construction has increased to record highs.

Over the 12 months to December 2015, there was a record-high 190,072 dwellings constructed nationally.

Ratio of population growth to dwelling completions


Source: CoreLogic, ABS 

With an increasing population, and the majority of growth coming from overseas migration, additional demand for housing is created.

The latest housing and occupancy costs research from the ABS showed that the average household sizes across each state and territory in June 2014 were:

• 2.6 persons in NSW, Vic, Qld and ACT;

• 2.4 persons in SA and Tas;

• 2.7 persons in WA and NT.

As can be seen in today’s accompanying charts, over 2015, the ratios of population growth to dwelling completions have been recorded at: 2.4 in NSW, 1.9 in Vic, 1.6 in Qld, 1.0 in both SA and WA, 0.8 in Tas, 0.4 in NT and 1.3 in ACT.


Source: CoreLogic, ABS 

A few important things to note from this analysis:

• The figures don’t take into consideration demolitions and homes constructed for non-permanent or semi-permanent occupation (previously estimated by the RBA at approximately 15%)

• Dwelling completions data may include construction of temporary accommodation such as hotels or serviced apartments

• An increase in population doesn’t necessarily create more demand for housing. For example a family having a baby may not create an immediate requirement for more housing while a new arrival from overseas is more likely to create additional housing demand.


Source: CoreLogic, ABS 

Based on the measure of population increase compared to dwelling construction compared to the average household size, it would appear that each state and territory is currently over-building however, there are some short-comings of this analysis as detailed above. 


It is clear that the ratio compared to the long-run average implies that under-building is still taking place in NSW and Vic while over-building is occurring elsewhere.

In most states, in the past there has been a substantial undersupply of housing which will continue to overhang any overbuilding for a period of time.

We also need to consider that when looking at this analysis, the type of dwellings that are being constructed.

As an example, units are becoming a much more prominent part of dwelling construction and are often smaller and therefore likely to house fewer residents than a detached house which also has an impact on these figures.

Core 4

Source: CoreLogic, ABS 

Although this analysis does not provide a definitive answer to whether too much construction is taking place, what is clear is that as population growth has slowed and dwelling construction ramps up, there is now a much better relationship between housing supply and demand. 13533867_l

This is highlighted by the fact that in most states and territories there has been a sharp decline in the ratio of population growth to dwelling completions over recent years.

With a number of new dwellings under construction and even more approved to commence construction, developers should take heed of these figures and exercise caution when looking to undertake new projects.

As population growth trends lower and construction ramps up, housing shortages appear to be diminishing quite rapidly.


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Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au

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