Big gap emerging between house and apartment construction

The latest dwelling approval data reveals a big gap opening up between house and apartment construction. IFM economist Alex Joiner advised there had been a "big pullback in building approvals." Approvals for apartments and townhouses dropped by 22 per cent year on year, the lowest level approved since January 2012, in seasonally adjusted terms. The approvals were down 39 percent month on month with $5bn of new residential builds committed in the month. ABS construction statistician Daniel Rossi anticipates the HomeBuilder scheme would continue to support the residential construction sector for the next few months. “The surge in HomeBuilder applications at the end of 2020, as well as the extension of the program to March, will continue to provide support for private house approvals in the coming months,” Mr Rossi said. https://twitter.com/IFM_Economist/status/1366548452486705152 But the relative weakness in higher-density approvals compared with the detached segment reflects the headwinds of the pandemic, "particularly very weak migration flows," James Foster, the global macro analyst noted. Foster suggested the migration restraints were "weighing on developer forecasts for demand." Approvals need to rebound sharply to match forecast required commencements, UBS economist George Tharenou told The Australian Financial Review, however TD economist Stephen Koukoulas suggested the pullback "may go someway to alleviate the looming oversupply issue." By contrast to high density approvals, approvals for private houses fell 12 per cent in January to 12,100, following their HomeBuilder-induced all-time December high, to be 38 per cent higher than in January 2020. Approvals for houses also fell across all states in January. The HomeBuilder stimulus measures had mostly been directed towards the detached segment of the market, Foster noted.