Dwelling approvals are now trending lower for houses and units.
In November 2018, 15,465 dwellings were approved for construction nationally which was the fewest monthly approvals since August 2013.
Approvals fell by -9.1% over the month to be -32.8% lower year-on-year.
After peaking in November 2017, the number of approvals in August 2018 was -32.8% lower.
9,543 approvals in November 2018 were for houses with approvals tracking -2.3% lower over the month and -6.5% lower year-on-year.
In November 2018 house approvals were -12.0% lower than their recent peak.
There were 5,921 unit approvals in November 2018 which was -18.4% lower over the month and -53.8% lower year-on-year.
The 5,921 unit approvals over the month of November 2018 was the fewest since June 2013 and down -53.8% from the monthly historic high in November 2017.
It remains to be seen how many of these approved new properties will be built given slowing housing market conditions and generally tighter financing arrangements for both investors and developers.
Dwelling commencements remain elevated but are now trending lower
Over the September 2018 quarter there were 54,803 dwelling commencements which was -5.7% fewer than the previous quarter but 2.9% greater than the same quarter over the previous year.
Over the quarter there were 29,335 new houses that commenced construction and 25,228 new units.
New house commencements were -4.5% lower over the quarter and 0.7% higher year-on-year while new unit commencements fell by -7.3% over the quarter and were -5.0% lower year-on-year.
Although dwelling approvals have eased, they remain at historically high levels; as a result commencements are likely to remain elevated albeit they are likely to trend lower.
Although commencements are expected to remain high, developers are likely, given the current state of the housing market and tighter credit conditions, to have greater difficulty achieving pre-sales commitments and obtaining development finance.
Completions for houses were at an historic high over the September 2018 quarter
Over the September 2018 quarter there were 57,671 dwellings completed nationally which was 3.3% higher over the quarter and 10.2% higher than the corresponding quarter in 2017.
The data consisted of an historic high 33,247 new house completions and 24,154 new unit completions.
New house completions were 12.8% higher over the quarter and 19.5% higher over the year.
New unit completions fell by -7.3% over the quarter and they were 0.4% higher over the past year.
There remains a substantial number of dwellings under construction which should ensure that completions continue to remain elevated for some time however, they are likely to drift lower over time as large new housing projects are completed and fewer replacement projects enter the construction phase.
The number of dwellings under construction at the end of September 2018 was slightly below the record highs recorded over the first quarter of 2018
At the end of the September 2018 quarter there 227,186 dwellings under construction nationally.
The 227,168 dwellings under construction consisted of: 68,284 new houses, 156,908 new units and 1,995 existing dwellings that were being renovated.
The number of new houses under construction fell by 3.8% over the quarter and were 40.0% higher than their long-term average.
The number of new units under construction was -0.2% lower over the quarter but 278.4% higher than its long-term average.
Although dwelling approvals have eased of late, they remain elevated as do commencements.
The heightened volume of stock both in the pipeline or commenced should result in heightened volumes of dwellings under construction over the coming quarters.
The heightened level of unit construction in particular, will take a number of years to work its way through to completion.
With many of the units under construction sold off the plan, buyers continue to face some risk that the value of their apartment could be lower at the time of settlement relative to the contract price due to weakening market conditions and higher supply levels, particularly across the high rise investment grade sector.
The number of dwellings approved but not yet commenced construction eased over the quarter
At the end of the September 2018 quarter there were 36,274 dwellings approved for construction that were yet to commence; down for the third consecutive quarter and the fewest since March 2016.
The current figure consisted of 9,325 new houses awaiting commencement and 26,581 new units not yet commenced.
Both houses and units recorded a decline in the number awaiting construction over the quarter.
The number of dwellings approved but not yet commenced across the states and territories are: 17,635 in NSW (fewest since September 2015), 5,940 in Vic (fewest since June 2016), 4,689 in Qld (fewest since December 2016), 4,103 in SA (most on record), 2,268 in WA, 477 in Tas (most since March 2012), 80 in NT and 1,081 in ACT (most on record).
With the housing market in a clear slowdown and tighter lending conditions for both borrowers and developers, it is expected that at the very least, an elevated, if not increasing number of projects which have been approved for construction will be delayed or withdrawn.
Source: Corelogic Quarterly Economic Review – released February 2019
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