Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 7 January 2016

Building approvals to decline in 2016

Approvals decline

The November Building Approvals figures confirmed that the boom has passed with a 13 per cent seasonally adjusted decline in the month, driven by a 23 per cent drop in unit and apartment approvals. 

With investor mortgage finance in decline, this downtrend is likely to become entrenched. 

On a rolling annual basis the peak has also now passed.

City by city

House approvals are now declining in Perth, and appear to be either plateauing or declining in all capital cities.

Over much of the last decade unit and apartment prices were at or below marginal replacement cost in Sydney, and as such very little stock has been built until relatively recently.

The latest available price data to the end of 2015 suggested that annual apartment prices performed as strongly as house prices in the harbour city - and supply is now responding in kind with 35,400 units approved over the year to November. 

Brisbane has also seen some 19,800 units and apartments approved, although it remains dubious as to whether such high volumes will actually be constructed. 

High rise glut

With the gas supply gradually being cut off the rolling annual number of building approvals is being held aloft by a record volume of "high rise" approvals, the sector of the market which is clearly set to underperform from a rental return and capital growth perspective.

Expect to see building approvals continuing to trend down from record highs as 2016 progresses and investor finance fades.