Dwelling starts tumble in FY2019
Building activity is one of those complex data series with many moving parts, and it probably deserves more than one blog post.
That's not going to happen, though, so let's take a brief look at the death of the construction boom in two short parts.
Part 1 - Housing starts fall 24pc
New dwelling starts seemed to stabilise at a more sustainable but lower level in the June 2019 quarter, down 24 per cent from a year earlier on a trend basis (and down by some 36 per cent for attached dwellings).
That's potentially a lot of construction employment that will need to replaced across the coming couple of years, suggesting that full employment is likely to remain elusive.
Since steep foreign buyer surcharges were introduced, it's been a similar story across the board over the past two financial years, with far fewer apartment projects attracting a green tick (although of course there have been other factors too).
Part 2 - The pipeline
By the end of the 2019 financial year the number of new dwellings under construction was down to 207,269 (from a peak of 231,416 as at March 2018), with further steep declines likely to be in the post.
Queensland has already worked through the bulk of its construction slowdown, with New South Wales now the main drag.
Over a period of 18 months the number of attached dwellings under construction in NSW has consistently declined from 68,772 in the December 2017 quarter to 57,842 by the end of June 2019.
Given we're now in October the figure is probably quite a lot lower today, too.
Given we're now in October the figure is probably quite a lot lower today, too.
The number of dwellings approved but not yet commenced declined to just over 32,000 at the end of FY2019, with 46 per cent of those being located in NSW.
FY2019 was the biggest ever financial year for dwelling supply in NSW, with a grand total of more than 75,000 completions.
The below chart helps to explain vacancy rates running as high as 3.4 per cent in Sydney by August 2019, as higher-density apartment completions continued to rain in.
The wrap
The ABS reported a modest increase in abandonments to 5,280 dwelling units across the financial year, and overall the pipeline is now shrinking quite rapidly.
Certain regions of Sydney are still working through a high volume of apartment completions, but the challenge for the broader economy in Australia will be how to plug the gap that is left as the record levels of residential employment fall away.
Economists are now openly debating the prospect of QE in Australia to reduce interest rates and hold down the level of the Aussie dollar.
