Home approvals hit record in FY2015

Posted on 1/08/2015  
Home approvals hit record in FY2015

The latest building approval figures illustrate how badly the media reports real estate data, resulting in misinformation and confusion.

The ABS data on building approvals for June, which were down 8.2% on the numbers for May, has been portrayed as “the end of the construction boom”.

But it’s far too early to draw any conclusions on the state of play in housing construction. There are always aberrations in the monthly data. It’s the longer-term trends that are important – and these show that residential building approvals for the financial year ending 30 June were a national record.

The run of record approvals over the past year continues several years of strong rises in home building – boosted by levels of apartment building which are, in some locations, too high.

For the 12 months to June 2015 there were 220,423 new dwellings approved - up from 195,302 approvals for the 12 months to June 2014.

Commentators who should know better are drawing all kinds of conclusions about the June monthly drop in approvals. The Property Council of Australia’s Executive Director Residential Nick Proud says the figures point to the market “responding to new macro-prudential settings with the reduction in approvals likely pegged to investor based activity”.

He’s referring to APRA moves to show down lending to property investors, but it’s too early to gauge whether this is having any impact, just as it’s far too early to call the end to the home building boom.

The Property Council continues to claim dwelling shortages – in fact Proud, singing the company tune, claims we’ve been under-building for 10 years. But this is just another part of the developer lobby’s campaign to try to pressure government into making developer-friendly decisions.

The reality is that home-building levels have been rising strongly for three years and building approvals in FY2015 were a record for Australia, boosted by over-building of home units.

The real story is not shortages, but the opposite – a looming over-supply of units in the inner-city areas of our capital cities, as well as the Gold Coast.

Master Builders Australia says the fall in approvals for June “was mainly driven by the topsy-turvy nature of high-rise apartment projects”. 

Chief Economist Peter Jones says:  “We will need to wait to see the effect of the authorities’ crack-down on lending to investors, but Master Builders does not believe a crash is imminent.” 

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