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Thursday, 10 January 2019

Au revoir construction cycle (KIBOSH!)

Crunch time!

Back in November 2017 there were some 12,823 attached dwellings approved, but by November 2018 the equivalent figure has collapsed 5,921, an impressive swan dive of 54 per cent. 

On the one hand, as you may recall, the prior year figure was inflated by a record 6,512 unit approvals in Melbourne, when half of Footscray was apparently approved for high-rise apartment living. 

On the other hand, this is no time for complacency as even the apartment projects that are under construction are increasingly stalling or at risk of failing. 

The smoothed monthly trend figures show that house approvals also declined virtually throughout 2018. 

Furthermore, Sydney's unit approvals fell to a multi-year low in November, all the way back down to levels commensurate with under-building for the prevailing level of population growth, sowing the seeds of the next cycle. 

Annual unit approvals in Brisbane have fallen by well over 50 per cent from their peak of three years earlier, and are now tracking at the lowest level since 2013. 

Even in Hobart - which has record job vacancies and has experienced the tightest rental market imaginable - unit approvals have been running at close to zero sine the Royal Commission kicked off. 

For the first time in years Australia built enough dwellings through this cycle, largely off the back of  a huge surge in Chinese investors, but the states have now effectively blocked foreign investment through surcharges and taxes, while the public sector has essentially given up supplying new housing too. 

Meanwhile, homebuyers finance very few new dwellings per annum, so that leaves Aussie investors to finance apartment projects...however, it's been decreed that investor credit growth must be constrained too. 

In short, the construction cycle is stuffed. 

HIA warns again

The Housing Industry Association is spitting chips (again): 

Source: HIA

Agree with the sentiment on timely and sensible processing, but it's doubtful they'll have much luck in the midst of a Royal Commission - especially with the legal geniuses being sticklers for questioning every last full stop and comma, as, of course, they are incentivised to be. 

Futures markets are increasingly looking towards a rate cut later in 2019, despite the RBA's reluctance to entertain the idea.

Au nom de la stabilité!