Growth Rates

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EXPERT OBSERVATION
Apartment building has started the year with solid growth.
Building Approval results were released today by the Australian Bureau of Statistics and report that new apartment approvals were up by 5.5% during the three months to January 2018.
Over the year to January 2018, new apartment approvals totalled 106,000 a very high level by historic standards. The annual volume of apartment approvals has been north of the 100,000 mark continuously since early 2015.
New building approvals remain strong in the Melbourne area. This market continues to be supported by high levels of inward migration – a result of the remarkably healthy labour market in the city. Melbourne’s ability to accommodate an expanding population so well has been a big factor in its recent economic success.
Growth in building approvals in Western Australia for two successive months is also a further sign that the down phase of their building cycle ended along with 2017.
New detached house approvals across Australia were largely unchanged over the three months to January 2018. The pipeline of activity on this side of the market also remains high and our expectation is that the market will continue to cool slowly over the year.
The heavy obstacles placed in the way of foreign buyers over the past year and well as the possibility of interest rate rises later this year are still likely to drag new home building activity lower over the medium term."
During the three months to January 2018, Victoria saw the largest increase in new home approvals (+26.0%) with growth also occurring in Tasmania (+7.0%) and Queensland (+1.3%). The ACT was hit by the largest decline in new dwelling approvals (-57.5%), followed by the Northern Territory (-23.2%) and South Australia (-11.2%). There were also reductions in New South Wales (-10.2%) and Western Australia (-1.2%).
Shane Garrett is a senior economist at HIA. He can be <a href="https://hia.com.au/business-information/economic-information/economic-group" target="_blank">contacted here.</a>
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New apartment approvals continue to soar: HIA's Shane Garrett

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Captial gains momentum slowed over Q2 2017 with combined dwelling values rising by 0.8 percent over the June quarter according to CoreLogic.
The CoreLogic Hedonic Home Value figures for June show the slowest quarterly growth rate since dwelling values fell over December 2015 quarter.
Tim Lawless, CoreLogic head of research said the CoreLogic Home Value Index recorded a recovery from the 1.1 percent fall in May, with an 1.8 percent rise in capital city dwelling values over the month of June.
<a href="https://www.propertyobserver.com.au/images/2017/07/03/Screen%20Shot%202017-07-03%20at%209.46.33%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-03%20at%209.46.33%20AM.png" alt="">
 
“This stronger month-on-month reading can be partially explained by the seasonality in the monthly growth rates," he said.
"Adjusting for this effect suggests an easing trend in housing value growth has persisted through the second quarter of 2017.
"The June quarter results showed that capital city dwelling values were 0.8% higher across the combined capitals index; the slowest quarterly rate of growth since December 2015 when the combined capitals index fell by 1.4 percent.
“This trend towards lower capital gains across the combined capitals index is mostly attributable to softer conditions across the Sydney housing market, where quarter-on-quarter growth was recorded at 0.8 percent over the June quarter; down from 5.0 percent over the March quarter. In contrast, the quarterly trend in Melbourne has been more resilient, with growth easing from 4.2 percent over the March quarter to 1.5 percent over the three months ending June.”
"For Sydney, the more pronounced slowdown is supported by weaker auction clearance rates which have been tracking in the high 60 percent range across the city over the last three weeks of June, while in Melbourne, clearance rates have moderated but remained above 70 percent.
<a href="https://www.propertyobserver.com.au/images/2017/07/03/Screen%20Shot%202017-07-03%20at%209.48.06%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-03%20at%209.48.06%20AM.png" alt="">
“Both markets experienced auction clearance rates consistently in the high 70 percent to low 80 percent range over the March quarter."
Across the combined capitals, the annual pace of capital gains eased from 12.9 percent three months ago to 9.6 percent for June 2017. Sydney’s annual growth rate has slowed to 12.2 percent over the twelve months ending June 2017, down from a recent high of 18.9 percent three months ago. Melbourne’s annual growth rate is now the highest of any capital city at 13.7 percent over the twelve months ending June 2017.
Lawless said the change in rental growth conditions is most noticeable in Canberra and Hobart, where rents are respectively increasing at 8.4 percent and 6.2 percent per annum, however Sydney and Melbourne rental markets have also seen a turnaround in what was previously a sluggish rental market.
"Rents in both cities are 4.5 percent and 4.1 percent higher over the past twelve months.
"The growth in rents can be attributed to the ongoing significant rate of net migration into New South Wales and Victoria.
“While the rental growth turnaround will be welcomed by landlords looking to recover higher mortgage costs, the consequence is that renters are now facing renewed pressure as rents rise.
"In Perth and Darwin, rental conditions remain subdued, falling by 8.3 percent and 5.4 percent respectively over the year, while Brisbane rents slipped 0.2 percent lower and Adelaide rents held reasonably firm, up 1.1 percent. 
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<img src="https://www.urban.com.au/images/2017/07/03/Screen%20Shot%202017-07-03%20at%209.49.27%20AM.png" alt="">
“It’s likely that landlords will be seeking to recover some, or all, of their increased financing costs associated with higher interest rates on investment in interest only loans by progressively increasing weekly rents. With record-low wages growth and so much new housing supply coming to market, this remains to be seen.
“Although growth conditions have lost momentum across the largest housing markets, we are yet to see any signs of a material downturn.
"The key drivers for a slowdown have been gradual. They include: mortgage rates pushing higher despite a steady cash rate, lender credit policies tightening up and housing affordability - which remains a significant barrier for many prospective buyers. Additionally, higher supply levels in the unit market appear to be creating a drag on the performance of the unit sector in specific segments.
“The impact of macroprudential measures announced by APRA at the end of March are still flowing through to mortgage rates and credit policies. We are likely to see further tightening and repricing around investment lending and interest only lending over the coming months.
“Considering investors comprised just over 55 percent of new mortgage demand across New South Wales, based on the latest housing finance data from the Australian Bureau of Statistics, a further slowdown in investment activity is likely to have a more substantial impact on housing demand in Sydney relative to other markets.
“There is a possibility some of the slack created by less investment in the Sydney housing market could be taken up by first home buyers taking advantage of stamp duty concessions that go live on July 1, however if this is the case, it’s likely to be temporary as higher first-time buyer demand could simply push prices outside the range applicable to the concession.”
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