Houses Keep Building Levels High

Posted on 12/04/2018  
Houses Keep Building Levels High

House construction is rising but the level of building of new apartments has dropped in the latest figures released by the ABS.

This comes as developers defer planned projects in the wake of over-supply risk in some of the major inner-city apartment markets.

APRA restrictions which have reduced investor demand, as well as disincentives for foreign buyers, are also blamed for the decline in construction of apartments.

“Investors have been the target of a number of regulatory interventions and we are now seeing this impact on residential building activity,” says HIA senior economist Geordan Murray.

ABS building activity data for the final quarter of 2017 shows that house starts increased 0.7% in the December 2017 Quarter, but starts for other dwelling types (mainly apartments) declined 11.2%.  

"The decline in multi-unit dwelling starts has dragged down the total number of new home starts,” he says. “The total number of dwellings starts fell 5% in the December Quarter and was down 8.3% on the level recorded a year earlier.” 

But the detached house market continues to shine. The number of detached house starts rose during the December Quarter and was also up compared with the level of a year ago. 

While apartment construction has dropped, there is a large pipeline of multi-unit activity in planning.

The HIA says over 150,000 multi-unit dwellings were under construction at the end of the 2017, only slightly below the 155,000 level at the peak of the cycle. There are a further 33,800 dwellings in projects that have been approved and are yet to start work.

"The combination of falling commencements and the build-up of dwellings in projects awaiting commencement is somewhat concerning,” Murray says.

“It is likely to indicate a slowdown in pre-sales activity. New projects will not commence construction until they achieve a satisfactory level of pre-sales. 

“Pre-sales to investors, both domestic and from overseas, have been important for many multi-unit developments. With additional taxes on foreign investors and regulators clamping down on investor lending, investors have retreated from the market.”

 

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