Pete Wargent blogspot

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

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Tuesday, 30 August 2016

Boing!

Approvals rebound

"What a difference a day makes" in the words of Rod Stewart (and whoever it was that crooned it before him).

The July Building Approvals figures posted a strong rebound with nearly 21,000 dwellings approved in the month on a seasonally adjusted basis, spring-boarding back up from 18,863 in June to notch the highest monthly result since May 2015.

In fact, July's result was the second strongest month on record for building approvals in Australia.

It rarely pays to get too aroused by one month of data, but it was another crunching month for total multi-unit approvals, which increased to a seasonally adjusted 11,513 from 9,928 in June (the result was driven by new flats and apartments, not townhouses). 

The recent results for attached approvals have to a certain extent mirrored those of housing finance and prices, which were initially clonked by tighter macroprudential regulations but have posted a fairly spirited resurgence since. 



The trend in detached house approvals still looks to be fading.

Looking at the annualised figures, the strong monthly result arrested the downtrend in total private sector approvals for now, totaling just shy of 235,000, which is still exceptionally high in historical terms.



City by city

Cutting straight to the point, July's result was driven by a flurry of attached dwelling approvals in Greater Sydney (4,933), Melbourne (3,029), and Brisbane (1,614), leading to an uptick in the annual figures for all three of the most populous capitals.

The numbers do jump around a bit, and the enormous result for Sydney in July came off the back of a run of generally more benign numbers since the beginning of the year.


Melbourne continues to approve by far the greatest number of detached homes, with a downtrend looking set to become entrenched in most other capital cities. 

Of the resources capitals, Perth is dropping rapidly, and so too is Darwin.


What's being approved? (glut)

If you travel around Australia a fair bit you probably don't need a chart to tell you that this cycle has been chracterised by a proliferation of tower blocks, and not only in the capital cities. 

Well, we got more of the same in July!

We arguably need a greater market share of this dwelling type in the future, particularly in the denser suburbs of the capital cities, but not this much more...


Yikes.

A messy correction coming for the new apartment sector is locked and loaded, it's largely just a question of how long and how messy.

Breaking out the annual figures by dwelling type shows that more than 72,500 units in blocks of four or more storeys have been approved over the year to July - some way below the October peak of nearly 78,000, but still an abnormally bloated result.

In fact, more than 8,500 units were approved in 4+ storey tower blocks in the month of July alone.



The wrap

Overall, a set of figures which rather contradicts the decline in new home sales yesterday, with a resurgence in new unit and apartment approvals in July. 

Whether or not all of these approvals ever get to see the light of day is another matter.

Nevertheless the result was a significant 'beat' on expectations, even if it was once again too concentrated in the burgeoning tower block sector.