Surge in dwelling approvals: Cameron Kusher
Newly approved housing supply has moved to new record heights, with 214,331 dwelling approvals recorded nationally over the past year.
The proportion of these approvals which were for units is also at a record high, accounting for 45.9% of all approvals.
The surge in dwelling approvals has coincided with very low interest rates and surging demand from the investment segment of the market.
Across the combined capital cities more than half of all dwelling approvals are for units and in each capital city (except Adelaide, Perth and Hobart) more than 50% of approvals over the past year were for units.
Data from the 2011 Census shows that across the country units are more than twice as likely to be rented as houses. This would indicate a clear preference from the investment segment which is currently so active, for units over houses.
While the number of new dwellings being approved is significant, it is worthwhile examining on a smaller scale the regions where the new housing supply is being approved. Looking at dwelling approvals across SA4 regions of the country, we have listed the top 20 regions for approvals for both houses and units over the 2014-15 financial year to April 2014.
For houses, the region with the greatest number of approvals over the financial year to-date was South East Melbourne (which includes council regions such as Casey and Cardinia) with 4,874 approvals. Looking at the top 20 list published, 15 of the 20 regions listed are located within capital cities with only Geelong, Sunshine Coast, Gold Coast, Latrobe-Gippsland and Bunbury in non-capital city areas. The top 20 list shows 3 NSW regions, 6 regions from Vic, 5 regions from Qld, 1 SA region and 5 regions from WA.
Turning to unit approvals, the list highlights the magnitude of approvals in Inner Melbourne with 12,516 approvals so far this financial year.
This region is already seeing a huge volume of new construction and the pipeline just keeps growing.
To put the volume of approvals in perspective, Brisbane Inner City with the second highest number of approvals (5,808) has less than half as many unit approvals as Inner Melbourne.
The Gold Coast is the only non-capital city area listed amongst the top 20 regions for unit approvals. Looking at the state-by-state breakdown there are 6 NSW regions listed, 6 Vic regions, 4 Qld regions, 1 SA region, 2 WA regions and 1 ACT region.
With the pipeline of construction activity remaining high and much of it high-density development, the multiplier effect from heightened construction activity should continue for a number of years.
Of course the biggest hurdle may start to be achieving necessary presales for these projects commence particularly given that many financial institutions are now starting to tighten their lending practices on the request of APRA.
With a particular focus on investment mortgages this may have an impact on demand from investors who are seemingly a key driver of the surging demand for inner city units.
Cameron Kusher is RP Data’s senior research analyst. Follow Cameron on Twitter here.
