Housing Approvals

ABS has today released the June data for housing approvals which shows that in NSW, the planning system approved 12.7% in less in June than was approved in May. The Council shut down for elections has started.

Urban Taskforce has warned the NSW Government that they faced a real risk that Councils would ease off on approvals in the lead up to what was to be the September elections.&nbsp; Today&rsquo;s data shows that the Government&rsquo;s light touch on Councils has resulted in precisely that.&nbsp; Worse, the Council elections have now been postponed till December and unless someone holds a blow-torch to the Councils and approval bodies, approvals will drop off further.&nbsp;

[smartcode_project:default project_id=31751]

Even prior to the lockdown, the productivity of the planning system had dropped off. Our economy cannot recover with this drop off in performance.&nbsp; Planning reform and approvals now will deliver a pipeline of work for when vaccinations allow our economy to fully re-open.&nbsp; There is an opportunity to catch up &ndash; but it seems that the planning system has slowed up again.

Urban Taskforce calls on the Government to immediately implement the recommendation of the NSW Productivity Commission White Paper.&nbsp; The GSC has set housing targets.&nbsp; It is up to the NSW Government to ensure that Councils meet them.&nbsp; Targets need to be regularly monitored against performance.&nbsp; There can be no excuse for Councils refusing to accept the targets.&nbsp; LGA Housing Strategies must come with sanctions for those Councils that selfishly refuse to contribute to housing supply, resulting in rising new home prices inflicted on those least able to afford them.

[smartcode_project:default project_id=30049 project_image_fid=162884]

The data shows that NSW housing approvals reached their peak in 2015/16 2016/17 and 2017/18 at around 73,000 approvals each year. Then, in the lead up to the NSW State election (2018/19) approvals dropped off to 58,000 and stayed low in 2019/20 with only 48,000, despite &ldquo;fast track&rdquo; schemes and a flurry of DPIE activity.

The total approvals have risen across all of NSW to 59,000 and this is welcome &ndash; but it remains well short of what is needed.&nbsp; The data reveals the problem.&nbsp; Apartment approvals across NSW have dropped significantly (most of these in Greater Sydney) while new separated house approvals have remained relatively flat.

<img alt="" height="444" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/screen_shot_2021-08-07_at_2.19.12_am.png" width="1180" />

The table above, based on the ABS data, clearly shows that the price escalation is due to a drop off in housing approvals and this is flowing on to a drop off in housing supply.&nbsp;

Further, the time taken to navigate the NSW planning system, even after an approval has been granted, often takes years, adding to risk for the property development industry and additional costs for new home buyers.

The message went out to Councils in 2018 that the NSW Government was going to go soft on them after the Council amalgamation debacle.&nbsp; But the result has been a massive under supply of housing.&nbsp; This will only get worse unless Government can incentivise Councils to deliver an over-supply of new approvals.

Council elections have now been postponed till December and unless someone holds a blow-torch to the Councils and approval bodies, approvals will drop off further. 

max.kwok_55688

ABS housing approvals data spells out why housing prices are going through the roof

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GUEST OBSERVER
Housing approvals recorded a strong June, but in trend terms are flattening out at levels well below last year’s peak. 
We expect further declines will come through in the remainder of the year, although it is likely the most sizeable falls have already occurred. 
Meanwhile, despite a small fall in June non-residential approvals remain elevated, led by strength in Victoria’s office segment.
<a href="https://www.propertyobserver.com.au/images/2017/08/03/Screen%20Shot%202017-08-03%20at%208.36.24%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/03/Screen%20Shot%202017-08-03%20at%208.36.24%20AM.png" alt="">
Housing approvals rose sharply in June, with 10.9% m/m growth more than offsetting the previous month’s decline. The monthly rise was driven primarily by the unit/apartment segment in New South Wales, which rose 43% m/m. Victoria also recorded a solid rise in June, up 6% overall, adding to May’s increase.
<a href="https://www.propertyobserver.com.au/images/2017/08/03/Screen%20Shot%202017-08-03%20at%208.37.36%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/03/Screen%20Shot%202017-08-03%20at%208.37.36%20AM.png" alt="">
The upshot of this strong result is that total building approvals (in trend terms) have started to stabilise some 15% below the peak of last year. We still expect further declines will come through over the second half of 2017, driven by tighter credit conditions and higher interest rates for investors, although the size of these falls will likely be tempered by the fact that the RBA is not yet embarking on a tightening cycle. At any rate, it appears that the sharpest falls in approvals are behind us.
Click to enlarge
<img src="https://www.urban.com.au/images/2017/08/03/Screen%20Shot%202017-08-03%20at%208.38.40%20AM.png" alt="">
While NSW housing approvals are proving resilient, Victoria is the shining light for the non- residential sector. In trend terms, non-residential approvals in Victoria are 60% higher than at the end of 2016. The office segment has been the key driver of this strength, with monthly approvals now sitting at record levels. This is likely to provide some offset to the eventual decline in housing construction as the current backlog of work is eroded. 
Daniel Gradwell is the senior economist for <a href="https://www.anz.com.au/">ANZ</a>.
 
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jchancellor-FAypfDUnLy

Australian housing approvals still falling: Daniel Gradwell

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 GUEST OBSERVER
RBA’s decision today to drop interest rates to 1.75 percent couldn’t have come at a better time for NSW as home approvals start to fall.
The March 2016 home approvals produced by the Australian Bureau of Statistics have dropped to 5,235 from 5,996 in June 2015.
Detached house approvals for March sit at 2,182 in trend terms compared to 3,209 for Victoria.
Higher density approvals continue to decline in NSW from 3,676 in May 2015 to 3,054 in March 2016. It seems the drop has slowed a little and this continues the slowdown from the high point in mid-2015.
<a href="/images/2016/05/03/Screen%20Shot%202016-05-04%20at%2010.42.14%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/03/Screen%20Shot%202016-05-04%20at%2010.42.14%20AM.png" alt="">
The biggest drop in approvals has been in the non-residential sector where NSW dropped from a value of $832,561,000 in September 2015 to $618,651,000 in March 2016. This is a large drop particularly as Victoria recorded approvals of $790,675,000 which is well above the NSW figure. With NSW’s population much larger than Victoria’s, this is also an indication that we are not producing enough employment lands in NSW
In the light of the drops to approvals in NSW it is good news that the Reserve Bank has dropped rates by 0.25 percent to 1.75 percent. The Reserve Bank’s reduction was partly influenced by fear of a deflationary spiral and the slowing approval numbers in NSW seem to reflect this.
It is important that the NSW Government support more housing supply by simplifying the approvals system. It is still taking too long to get approvals in NSW which is causing the supply of new homes and jobs to underperform compared to Victoria.
Chris Johnson is chief executive officer of property development industry group Urban Taskforce and can be contacted <a href="https://www.urbantaskforce.com.au/index.php?option=com_content&amp;view=article&amp;id=97&amp;Itemid=126#.Vdaart55dFI" target="_blank">here</a>.
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Interest rate drop couldn’t have come at a better time for NSW home approvals: Chris Johnson

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Private sector house approvals jumped 6.1 per cent over November to reach their highest levels since 1999, figures released by the ABS found.

They've now soared by 40 per cent since June.

Daniel Rossi, director of construction statistics at the ABS, said that Federal and state housing stimulus measures and low interest rates have resulted in strong demand for detached dwellings.

There were 11,489 houses approved for building over November.

Queensland led the way in approvals, up 17 per cent, followed by Western Australia up 7.5 per cent.

South Australia saw 2.8 per cent more private sector houses approved, Victoria 1.5 per cent and New South Wales 0.7 per cent.

<img alt="" height="1083" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/november_building_approvals.jpg" width="1200">

Total building approvals were up 2.6 per cent, beating economist forecasts of a two per cent rise.

Over October approvals rose 3.6 per cent.

 
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There were 11,489 houses approved for building over November

Joel Robinson

Private sector house approvals reach highest levels since 1999

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EXPERT OBSERVATION
After holding relatively steady through most of 2017 and early 2018, Australian housing finance approvals showed a notable pull back in the March month. The total number of owner occupier approvals declined 2.2% to be down 3.5%yr – below market expectations of a 1.5% fall but a touch better than industry figures that had pointed to a 3% decline.
The real weakness was around the value of investor approvals which dropped 9%mth to be down 16.1%yr. Estimates of investor approvals ex refi are down over 26%yr and just over 30% vs their 2016 peak. That puts the 2017-18 slowdown on a par with that seen in response to the macro-prudential tightening in 2015-16.
Combined, the total value of approvals ex refi fell 4.6%mth to be down 6%yr.
The detail on owner-occupiers showed a broad based decline.
The number of owner occupier construction approvals fell 4.4%mth to be down 4.3% on a year ago and 11% over the last two months alone. The number of owner occupier approvals for the purchase of newly built dwellings declined 1.4%mth but is still up over 5% on a year ago.
The number of approvals to first home buyers (FHBs) fell 4.6%mth but is still up 25%yr due to strong demand in NSW and Vic where state governments have increased assistance for first time buyers. The decline suggests the peak of this boost is starting to cycle through.
The state data showed owner occupier approvals ex refi down in most major states, the biggest fall in SA (–9%mth) with more modest declines in NSW (–2.6%), Vic (–1.6%) and Qld (–1.1%). WA (1.2%) and Tas (+1.5%) recorded slight gains. Owner occupier finance approvals ex refi are down on a year ago basis for every major state except Vic (–2.8%). Other, more recent, housing data suggests there has been a slight further softening in auction markets in April-May with price growth continuing to slow, in Melbourne in particular.
Overall, the March update points to a renewed weakening in demand. More slippage looks likely near term as lenders tighten loan criteria and borrowing capacity assessments – with more stringent assessments also potentially slowing loan processing times. Notably, the average value of owner occupier loans rose in the month and over the year to March, suggesting the softening in approvals to date does not reflect a tightening in borrowing capacity (although this may have been a factor in the investor loan decline).
To read the full report, <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2018/May/er20180511BullHousingFinanceMar.pdf" target="_blank">click here.</a>
Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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Matthew_Hassan-HHWHptmrw4

Australian housing finance approvals pull back: Westpac

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EXPERT OBSERVER
Dwelling approvals showed a further weakening in June broadly in line with Westpac’s forecasts but weaker than the consensus view. Total dwelling approvals fell 4.9% to be down nearly 20% over the last two months, touching an eight year low.
The detail showed weakness in the month was more broadly based than May’s unit driven fall. Private sector unit approvals declined 5.3%mth to be down 23.4%qtr for Q2 as a whole (our estimates suggesting 'high rise' down 27.8%qtr and 'low rise' down a much milder 6.2%qtr).
Private sector detached house approvals posted a similar sized 5.7% decline in the June month but were more resilient for the quarter as a whole, down just 2.6%qtr. On a monthly basis, all segments are down materially on a year ago.
All states recorded declines, although they were more pronounced in NSW (–14.8%), WA (–11.7%) and Qld (–10.9%), and more muted in SA (–4.6%) and Vic (–0.2%). All states have seen double digit declines over May-June.
The value of renovation approvals posted a relatively strong 11.4% surge in June. This may be an early sign that relaxing restrictions in May-June are seeing some improvement, given renovations are likely to have shorter lags between application and approval. However, it should be noted that the gain is coming after some large falls with June approvals still below their March level and the value still down 9%qtr for Q2 as a whole. The segment is likely also benefitting from expenditure switching as COVID restrictions limit discretionary spending in other areas.
The value of non res. building approvals also rebounded, rising 17.8%mth, but was also coming from a weak starting point, approvals still 6.6% below their March level and down a whopping 18.1%qtr for Q2 as a whole.
For dwellings, the pull back continues to track broadly in line with Westpac's forecast. We expect approvals to come in at 145k for the full calendar year, roughly in line with the annualised pace in the June month and implying further weakness over the second half of the year. Note that approvals are likely to understate weakness in building as work on many existing projects will be delayed and some approved projects will be shelved or slower to commence.
Against this, the Federal government's HomeBuilder scheme, which provides $25k grants to eligible owner-occupiers buying a new home (or renovating an existing home), will give some support in months to come. With COVID-19 disruptions becoming more uneven geographically, state approval numbers are also likely to see a widening divergence in the second half of the year, Qld, WA and SA well placed to rebound and respond to stimulus measures, NSW seeing a slower reopening and Vic still contending with a large 'second wave' outbreak.
MATTHEW HASSAN is a Senior economist at Westpac
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Dwelling approvals hit eight year low: Matthew Hassan

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The latest private residential building approvals chart in the latest chart pack from the Reserve Bank of Australia shows a marked increase in higher-density housing development between 2009 and 2015.
Approvals for detached housing dipped between 2009 and 2014. 
<a href="/images/2015/08/13/Screen%20Shot%202015-08-13%20at%2011.28.42%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/08/13/Screen%20Shot%202015-08-13%20at%2011.28.42%20AM.png" alt="">
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mick.cee-iDmgDDAmu8

Notable increase in high density housing development since 2009: RBA 

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Sydney's residential prices have dropped 1.6 percent in the December 2015 quarter, according to the ABS recent Residential property prices index release.
They are still 13.9 percent up however annually.
Canberra saw the biggest increase over the quarter, with a 2.8 percent increase, with Hobart increasing by 2.5 percent.
Melbourne and Brisbane increased by 1.6 percent each.
<a href="/images/2016/03/22/Screen%20Shot%202016-03-22%20at%2011.43.47%20am.png" target="_blank">Click here to enlarge</a>
<img src="/images/2016/03/22/Screen%20Shot%202016-03-22%20at%2011.43.47%20am.png" alt="" width="536" height="178">
<a href="https://twitter.com/PeteWargent" target="_blank">Pete Wargent</a> was one of the first to take to Twitter, highlighting the changes since 2008.
The Sydney price drop news quickly travelled the world, and was picked up by US-based <a href="https://twitter.com/autoforexalerts" target="_blank">@autoforexalerts</a> 
<a href="/images/2016/03/22/CeHNmOHW0AQ9BkI.jpg-large.jpg" target="_blank">Click here to see the enlarged chart</a>
<img src="/images/2016/03/22/Screen%20Shot%202016-03-22%20at%2011.50.19%20am.png" alt="" width="383" height="342">
 
DECEMBER KEY POINTS
 CHANGES TO RESIDENTIAL PROPERTY PRICE INDEX
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<li type="square">The price index for residential properties for the weighted average of the eight capital cities rose 0.2% in the December quarter 2015. The index rose 8.7% through the year to the December quarter 2015.</li>
<li type="square">The capital city residential property price indexes rose in Melbourne (+1.6%), Brisbane (+1.6%), Adelaide (+0.9%), Canberra (+2.8%), Perth (+0.5%) and Hobart (+2.5%) and fell in Sydney (-1.6%) and Darwin (-1.8%). </li>
<li type="square">Annually, residential property prices rose in Sydney (+13.9%), Melbourne (+9.6%), Canberra (+6.0%), Brisbane (+4.2%), Hobart (+3.5%) and Adelaide (+3.3%) and fell in Darwin (-3.2%) and Perth (-2.9%). </li>
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 TOTAL VALUE OF THE DWELLING STOCK
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<li type="square">The total value of residential dwellings in Australia was $5,885,967.2m at the end of December quarter 2015, rising $31,557.1m over the quarter. </li>
<li type="square">The mean price of residential dwellings rose $800 to $612,100 and the number of residential dwellings rose by 38,700 to 9,615,800 in the December quarter 2015.</li>
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jonathanchancellor-7SQnKwU6yx

Sydney house prices fall: ABS

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Dwelling approvals came in weaker than expected with a 5.6% fall in May vs market expectations of a 1.3% decline. Total approvals were down 19.7%yr.
The decline was driven by a 12.1% drop in ‘units’, with a 0.6% gain in private house approvals providing some offset. Nationally, May saw the second lowest monthly reading on high rise approvals since June 2013 – the lowest being the weather-affected read in March.
The detail points to a sharp drop in ‘high rise’ (–20%mth) concentrated in NSW and Qld where total approvals were down 16% and 10.5% respectively. 'High rise' approvals have slumped –45% vs a year ago. Other segments continued to hold up better, 'low rise' approvals down –8.4%mth, –16.5%yr and private detached houses approvals up +0.6%mth, –6.8%mth, broadly consistent with some firming in construction-related housing finance approvals. That said, all segments are down on a year ago.
All major states are also seeing total dwelling approvals down on a year ago, the one exception being SA which has seen a strong lift in recent months led by high rise approvals (though still at a very low level). Aside from this and the aforementioned weakness in NSW and Qld, total dwelling approvals lifted 4.7% in Vic and fell 8.9% in WA.
The value of renovation approvals rebounded 12.7% in May from a 15.2% drop in April but are still down 6.2%yr and trending lower.
Non res building is more promising with a 5.3% gain in the value of approvals in May maintaining a solid uptrend. Recent strength has been across a range of sub-segments including offices, retail, hotels &amp; recreation, and education.
In terms of the total value of building – new dwellings, renovations and non residential building combined – approvals are down 13.2% vs last year's peak but have risen 7.4% since the start of the year. The state split shows the pull back concentrated in NSW and Vic with other states posting a modest gain on a combined basis.
Coming back to the more specific picture around housing, the May approvals update again highlights the dominance of high rise in the current cycle with the dramatic reduction in approvals over the last year set to drive a downturn in construction.
As discussed elsewhere, our analysis suggests it will take some time yet for the turnaround to impact aggregate activity and will tend to see a longer more protracted downturn than the short sharp cycles seen in the past.
March quarter building activity data due next week will give an updated view on the pipeline, which also looks to have been impacted by weather events early in the year. 
Non high rise approvals and wider housing market conditions are an important swing factor that could amplify the downturn – so far both appear to be holding up reasonably well although the full impact of macro prudential measures and other negatives has yet to be felt.
Matthew Hassan is a senior economist for <a href="https://www.westpac.com.au" target="_blank">Westpac</a>.
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j.ballantyne1990-6AQqhLzZaK

Australian dwelling approvals weaker in May: Westpac's Matthew Hassan

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GUEST OBSERVER
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Australian housing finance approvals to owner occupiers edged up 0.5% in June, undershooting market expectations of a 1.5% gain. The total number of approvals is down 4%yr.
The picture was ex-refinancing was more in line with expectations with a 1.9% gain to be up 3.4%yr.
Note that the macro prudential tightening measures introduced in late March and associated increases in increase rates for investor and 'interest only' loans have likely given indirect support to owner occupier loan activity.
That said, the value of investor loans was stronger than expected, posting a 1.6% gain to be up 5.7%yr. The total value of loans was up 0.8%mth – ex refi up 1.5%mth, 7.1%yr.
Note that a second round of mortgage rate increases for 'interest only' loans came through late in the month and is likely to impact in coming months.
The state detail is of limited use as investor loans are not split out in this release.
However a notable point in the loan type detail is the continued surge in construction-related finance approvals – finance for construction up 3.6%mth and finance for the purchase of newly built dwellings (which includes for settlement of ‘off the plan’ apartment purchases) up 3.5%mth. The former suggests non high rise construction is likely to lift while the latter is likely related to the wave of high rise apartment completions.
Overall, the numbers will be disappointing for regulators looking for a more material slowing in investor activity although the full impact of macroprudential measures has yet to come through.
Details Owner–occupiers (no.) 0.5%mth, –4%yr
– ex-financing (no.) 1.9%mth, 3.4%yr
Construction of dwellings (no.) 3.6%mth, 8.9%yr
Purchase of newly built dwellings (no.) 3.5%mth, 10.2%yr
Value of loans:
Owner-occupiers ($bn) 0.3%mth, 1.2%yr
Investors ($bn) 1.6%mth, 5.7%yr
Total ($bn) 0.8%mth, 2.9%yr
Total ex refi ($bn) 1.5%mth, 7.1%yr
 
Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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