New home demand soars amidst approval downturn

We know that we're just not building enough homes despite soaring demand for more accommodation.

According to PropTrack's  New Homes Report, December saw a 9.5% drop in total building approvals, a stark contrast to the modest 0.3% increase in November.

This decline was particularly pronounced in unit approvals, which plummeted by 25%, and to a lesser extent in house approvals, which edged down by just 0.5%.

This downtrend in approvals, evident since March 2021, poses a significant challenge, according to Karen Dellow, Senior Data Analyst at PropTrack.

She said we need a considerable uptick in these numbers if we aim to meet the ambitious goal set by federal, state, and territory governments: the construction of 1.2 million new homes by 2029.

In tandem with these lower approval rates, new project commencements have also retreated – down 9.7% for houses and 11.2% for units.

Shifting trends in property listings

However, it's not all gloomy news in the new homes sector.

According to the report, a year-on-year increase in listings for new apartment and retirement developments on realestate.com.au is injecting some optimism into the market.

While overall new build listings have marginally decreased by 1%, apartment listings have grown by 7%, and retirement properties have surged by an impressive 43%.

The house and land segment has seen a slight decline of 4%, with varying regional trends.

New South Wales, Tasmania, and Queensland are experiencing robust growth, while Western Australia faces a substantial decrease, with South Australia and Victoria witnessing more modest declines.

Retirement property listings have particularly flourished in New South Wales, Queensland, and Victoria, recording increases of 77%, 35%, and 27%, respectively, over the past year.

In Melbourne, there's been an 18% increase in apartment listings, according to the report.

Similarly, Queensland and South Australia have also seen growth in this sector.

Ms Dellow notes that the bulk of these apartment developments are concentrated in high-density urban areas, especially in inner Melbourne and Sydney, with the Gold Coast trailing at 10%.

Southbank in Melbourne, Melbourne CBD, and Surfers Paradise in Gold Coast top the list for the most apartment projects.

Interestingly, Sydney's suburbs like Macquarie Park and Castle Hill are outliers, being considerably farther from the city centre.

When it comes to house and land listings, these are predominantly located in the outer suburbs of Melbourne, Sydney, and Brisbane.

Geelong, an hour from Melbourne, boasts 17 projects, highlighting the expansion into regional Victoria.

The most active suburb for house and land developments this January was Box Hill in Sydney, where properties are fetching upwards of $1 million each.

Engagement and demand

Engagement with new development listings on realestate.com.au has risen by 15% compared to last year, with retirement listings enjoying a 20% increase.

House and land listings have seen a 19% increase in buyer engagement, marking nine months of positive growth.

Apartment listings have experienced a modest 1% increase in engagement.

Inner Melbourne and the Gold Coast, areas with the highest apartment listings, are also leading in enquiries.

Logan - Beaudesert in Brisbane topped the list for house and land development enquiries in January, followed by Perth - North West, and Sydney - Baulkham Hills and Hawkesbury.

The most sought-after project in January was an apartment development in Urangan, Hervey Bay, with Topaz Shelly Beach apartments ranging from $599,000 to $1.5 million, offering stunning ocean views.

Looking Ahead

As we navigate into the next year, Ms Dellow highlights that the real challenge lies in ramping up stock levels to accommodate Australia's growing population.

The rental market, in particular, is in dire need of expansion to cater to the influx of overseas migrants and students.

Though investor participation remains subdued, the scarcity in existing stock might pivot buyers towards new builds, potentially triggering a rise in new approvals.

About Adam Hubbard Adam Hubbard is a senior Wealth Strategist at Metropole and his many years of real estate and wealth creation experience gives him a holistic perspective with which he helps his clients safely grow their wealth through property.