Approvals crash
Building approvals for attached dwellings crashed 44 per cent lower in July to just 3,349, which is the lowest level in a decade.
And this comes just as immigration starts to ramp up.
Total attached dwelling approvals haven't been lower than this on a monthly basis since the global financial crisis in 2009.
Of course, the monthly data for unit approvals is lumpy, and always will be.
Looking instead at a rolling 12 month graph shows that the decline has been driven by Greater Sydney, where there were only 863 units approved in July, down from 1,987 a year earlier (and a thumping 5,109 back in July 2016, just before the surcharges on foreign purchasers kicked in).
House approvals were flat in July, to be 18 per cent lower year-on-year.
Approvals are trending lower across the board for detached homes.
The value of non-residential building approved fell 23 per cent in July, though the annual figures remain solid, and there is still a high volume of work in the pipeline for the time being.
The approvals figures are becoming a little less indicative at the moment, with so many projects being scrapped and developers going bust.
Rental shortage
SQM's weekly for rent listings have continued to decline to series lows, despite the population of Australia increasing by 4 million between the 2011 and 2021 Censuses.
Source: SQM Research
Australia appears to be sleep-walking towards a rental crisis.
It was reported earlier this month that excessive taxation and regulation has led to there being only around 700 rental properties available across Ireland, with regular reports of long queues outside the few remaining properties being made available for rent.
Australia isn't in this kind of crisis mode just yet, but things seem to be grinding inevitably in that direction, with more landlords looking to sell up.
We already had the restrictions on depreciation benefits deductibility post May-2017, and now the Queensland government is planning changes to land tax levies...even for properties located outside the state.
And with major reforms to no-eviction laws and minimum property standards (including, for example, the sustainability of appliance energy use in Canberra), many landlords will choose to sell their rentals to move into asset classes where the goalposts aren't continually shifting from beneath their feet.
With foreign investors also effectively taxed out of the market by stamp duty surcharges, the new unit supply is drying up just as immigration resumes into the busy summer months, while the Airbnb phenomenon may have also had a role to play in the rentals shortage.
There's also the small matter of the enormous 300 basis points lending
assessment buffer put in place by regulators, while a rapid series of interest rate increases also tends
to shift the buy versus rent equation towards the renting side of the ledger.
There’s no easy fix here, but a useful start would be bringing the serviceability buffer back down from 300 basis points in September.
After the next interest rate hike the lending assessment buffer in place will be effectively stress testing for a scenario which financial markets see as remote.
