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Wednesday, 11 July 2018

Melbourne construction boom scales new heights

Melbourne construction boom

An intriguing set of building activity figures as ever for the March 2018 quarter. 

The most interesting point of note was how thousands of building approvals in the Victorian pipeline were kicked off as dwelling starts in the first three months of the calendar year (recall how Melbourne saw nearly 10,000 townhouses and apartments approved in only a two-month period in October and November last year).

In New South Wales, on the other hand, there are more houses and apartments approved but not yet commenced than ever before, as developers grapple with tighter financing and languishing apartment pre-sales. 

Following on from the above, there was a near-explosion in the number of quarterly dwelling commencements in Victoria, to a seasonally adjusted 22,150, well over double the equivalent figure from a decade earlier.

Melbourne's population growth has been tracking at record highs, and demand for housing is high.

This alone was significant enough to send the national trend for dwelling commencements northwards. 

In Queensland more houses are being commenced in response to strong demand from interstate migrants, but the number of attached dwelling starts continues to moderate as the Brisbane apartment market rebalances. 

Pipeline is enormous

The number of residential dwellings units under construction also increased as a result of the Melbourne building boom to more than 224,000, a record high.

You can also see the leap in Victorian attached dwellings under construction to a record level, while Sydney completions are now finally raining in, which should result in a spike in vacancy rates in the harbour city as the year rolls on. 

Both the value of building work to be done ($71.4 billion) and total building work in the pipeline ($95.8 billion) are at all-time highs in current prices terms. 

The big question mark is how many of the buyers of off-the-plan apartments will be unable to settle, especially if more valuations at settlement start to come in at under the contract price.