Approvals show apartments are taking the brunt of the fall

GUEST OBSERVER

The lumpy result in monthly building approvals data continues, with total dwelling approvals up by 10.9 per cent in the month of June 2017.

However the longer term trend shows sustained weakness with total approvals down by 2.3 percent over the year to June, particularly for apartments.

Given the boom in apartment construction in the past couple of years it is to be expected that the fall in approvals is predominantly coming from this segment of the market.

Approvals for apartments and town houses fell by 6.6 per cent over the year-to June 2017, while approvals for detached housing actually increased by 1.4 per cent.

A result in line with Master Builders forecast outlook for a fall in apartment commencements over the next four years.

But there remains a housing shortage in Australia of around 100,000 dwellings and it would be concerning if the current weakness in approvals turns into low housing commencements leading to supply constraints that can push up house prices.

We can’t lose sight of the fact that increased population growth and other factors of underlying demand mean we need to build at least 180,000 new homes each year for the next five years.

Matthew Pollock is Master Builders Australia’s National Manager for Economics and Housing and can be contacted here.