Lending approvals are up; New dwellings are up; High-density commitments are up. While there is no doubt that multi-unit construction remains the strongest performing sector of the industry over the past five years, there is continued speculation that the demand will not be sustainable.
The Australian Bureau of Statistics (ABS) figures published on Tuesday reports that mortgage lending among investors in November had risen by 4.9 percent from October.
While the total value of dwelling commitments excluding alterations and additions rose 0.6 percent in the same corresponding period.
The total value of owner occupied housing commitments was flat in November as rises were recorded in commitments for the purchase of new dwellings were up by $9 million or 0.9 percent, and commitments for the construction of dwellings were up $7 million (+0.4 percent), while a fall was recorded in commitments for the purchase of established dwellings contracted by 0.2 percent or down by $26 million.
The seasonally adjusted series for the total value of owner occupied housing commitments rose 0.4 percent in November, said ABS in a statement.
The total value of investment housing commitments rose $210 million or 1.7 percent in November compared with October.
“Rises were recorded in commitments for the purchase of dwellings by individuals for rent or resale (up $203 million, 1.9 percent) and commitments for the purchase of dwellings by others for rent or resale (up $4 million, 0.4 percent) and commitments for the construction of dwellings for rent or resale (up $3 million, 0.3 percent). The seasonally adjusted series for the total value of investment housing commitments rose 4.9 percent in November,” ABS added.
Even home dwellings recorded a positive growth with the Housing Industry Association (HIA) reports that the volume of approvals for new dwellings bounced back strongly in November, particularly on the multi-unit side.
“During November, new dwelling approvals rose by 7.0 per cent compared with the previous month but were 4.8 per cent lower than a year earlier,” explained HIA Senior Economist, Shane Garrett.
“November was a particularly good month on the multi-unit side of the market with approvals increasing by 17.3 per cent during the month following a big fall in October.”
“Detached house approvals declined slightly by 0.4 percent during November. However, over recent months the detached house side of the market has been considerably more stable than multi-units.”
Garrett said last year held the record for new dwelling commencements while this year will ensure that the volume of residential building activity remained elevated.
“However, we anticipate that new dwelling starts will decline over the next 12 months, with this likely to be felt on the ground towards the end of this year,” said Garrett.
In November, the largest increase in seasonally-adjusted dwelling approvals occurred in Western Australia (+24.4 percent), followed by Victoria (+9.4 percent) and South Australia (+7.1 percent).
The volume of approvals also rose in Tasmania (+5.2 percent) and New South Wales (+5.1 percent), while in Queensland, dwelling approvals fell by 4.6 percent during the month.
In trend terms, approvals declined by 5.1 percent in the Northern Territory and were down by 3.4 percent in the Australian Capital Territory.
However, it may be a doom and gloom year for all things apartment related as the IBISWorld predicts that after several years of accelerated growth the once iron-clad multi-unit apartment and townhouse construction industry will contract sharply by 26 percent during 2016-17 period to $19.3 billion.
“Investment in apartment construction has been the strongest performer of the national building market over the past five years,” said IBISWorld senior industry analyst Nathan Cloutman.
“A long-term shift in Australian housing preferences has enhanced this trend, as consumers have moved away from traditional low-density detached houses and towards higher-density apartments.
“These have included the Barangaroo South project in Sydney and the start-up of Australia 108 in Melbourne.
“Homebuyers and renters have increasingly sought the lifestyle benefits of inner-city living and the lower land costs associated with higher-density dwellings,” said Cloutman.
“In 2015-16, multi-unit residential building commencements climbed to a record peak, accompanied by a cyclical revenue high of $26.2 billion. Demand conditions are projected to deteriorate sharply during the current year on the completion of major developments and as oversupply conditions emerge in several key markets,” added Cloutman.