The relationship between dwelling approvals, commencements and completions

Recently the Australian Bureau of Statistics (ABS) released building activity data for the December 2014

The data includes quarterly figures for dwelling commencements and dwelling completions.

With a record number of dwelling approvals coming through the system it is important to track this data as it provides insight into how many of these approvals are ultimately being constructed.

Over the past 30 years, approvals and commencements have been highly correlated with the vast majority being approved and commenced in the same quarter.

If we look at the relationship between approvals and completions, most houses are completed two quarters after approval while most units are constructed three quarters after being approved.

Chart 1

Based on this data over the past 30 years, 96.5% of house approvals have moved to the commencement phase and 96.2% of unit approvals have been commenced.

Looking at the completion rate for houses based on a two quarter lag, 95.1% of houses which have been approved are ultimately completed.

For units the completion rate has been somewhat lower.

Using a 3 quarter lag between approval and completion, 86.9% of units approved for construction have been completed.

On this logic, detached housing approvals are much more likely to result in a completed product, with a fallout rate of just 5%, while apartment approvals are less likely to ultimately be constructed, with a dropout rate close to 15%.

Chart 2

The results are much different over the past five years with the correlations not as strong as they have been over the longer term, particularly for apartments.

The commencement rate for properties approved for construction over the past five years has been stronger than it has been over the past 30 years.

Over the past 30 years, 96.5% of houses approved had been commenced in the same quarter compared to 98.1% over the past five years.

For units, the commencement of approvals has typically been a quarter later over the past five years however, the likelihood of commencement has increased from 96.2% over the past 30 years compared to 97.8% over the past five years.

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Looking at the completion rate of approvals over the past five years, with a lag of two quarters 96.7% of houses approved for construction have been completed over the past five years.

For units, based on a three quarter lag 85.1% of units approved have been completed.

Note that the completion rate of houses over the past five years has been stronger than over the past 30, while the unit approval to completion rate has been slightly lower.

One of the possible reasons for the reduced completion rate of units is likely to be the increasing level of high density unit construction.

While the data indicates a lag of three quarters from approval to completion the reality is higher density unit construction takes significantly longer to complete often a number of years.

The data highlights, whether you look at it over the longer or shorter timeframe, that houses which are approved for construction are ultimately more likely to be completed than units.

With a record-high number of unit approvals currently there is no guarantee that they will all end up constructed

plan3The long term and short term averages indicate we should expect around 15% of apartment approvals won’t transition to a completed product.

The more timely dwelling approvals data showed an all-time high number of approvals in January and the second strongest month on record in February.

The data clearly shows that the pipeline of housing construction is continuing to grow and that commencements will likely remain high for most of 2015 while the heightened level of completions is likely to extend out over the next few years at least.



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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

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