Melbourne towerz defy construction gloom

Melbourne: last towers standing

When I wrote the Requiem for a Construction Bubble report last year I noted that there was one city that could possibly hold up construction levels in the tighter lending environment, being Melbourne, due to its rampant population growth. 

Seasonally adjusted unit approvals ripped 65 per cent higher in February, which may grab a few headlines, but of course as well as being seasonal these monthly figures are also outlandishly volatile.

The rebound was driven by some major apartment projects in Melbourne, and to a somewhat lesser extent Sydney, but overall it makes more sense to look at unit approvals as a rolling annual trend.

In annual terms Sydney and Brisbane continued to lead the way down for unit approvals, while Melbourne is struggling gamely to stay afloat. 

A new apartment tower or two for Melbourne might be jolly nice, but a far more pressing issue for the Aussie economy is the increasing unwillingness or inability of Aussies to build and then furnish homes.

Alongside currency moves this lack of confidence has led in turn to a horrible plunge in online retail activity according to NAB's latest surveys. 

A late-cycle exception approval is Hobart where record high annual dwelling approvals are now addressing the rental shortage in Tasmania. 

Public sector dwelling approvals continued their structural decline in February 2019, to the extent that private landlords are now supply close to 100 per cent of net additions to the rental market supply. 

The wrap

Overall, a nice bounce for apartment approvals in Melbourne, but at the national level considerably fewer detached homes are now being approved and built, and construction finance is also pointing the way down. 

A reasonable headline result, then, but with private sector house approvals 14 per cent lower year-on-year and a rather alarming collapse in retail readings, the outlook for construction remains pretty crook.