Real Estate Investment:Today

Dwelling approvals rise 43.5% on higher apartment and detached house approvals

We know that there is an acute shortage of accommodation in Australia.

In fact Australia is facing a rental crisis as national vacancy rates dip to the lowest point on record.

Rental vacancy rates keep falling across all cities for both houses and apartments.

And moving forward opening the international borders will put additional strain on the already tight rental market pushing rents even higher.

So it was good to read that residential building approvals surged 43.5% in February as approvals more than recovered the 27.1% fall recorded in January

  • House approvals rose 16.3% to be only a little below their levels in December last year.
  • The more volatile apartment approvals series rose 78.3% month on month, to its highest levels since September last year after a sharp fall last month.

The chart below shows that new detached house approvals remain a little above pre-pandemic levels at the start of 2022, but the downtrend from the peaks seen in April 2021 remains broadly intact.

 

 Building approvals rebounded sharply in February driven by both houses and apartments

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So what’s ahead?

The key question going forward remains the extent that housing construction was brought forward due to Homebuilder and other state-based construction grants and whether approvals continue to fall as a result. 

Although detached house approvals bounced out of the sharp January decline, they remain 33% below their Homebuilder-induced peak in April 2021.

However detached house construction is capacity constrained and price pressures in homebuilding are at very elevated levels.

It will take some time for the backlog to be worked through.

House approvals have been trending lower across most states

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03 New dwelling construction costs have soared with construction costs overall around 10% higher than they were prior to the pandemic.

And there is no end in sight meaning home building is expected to continue to contribute to rising inflation through the first half of 2022

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