House approvals boom to record levels
Australia’s approvals of free-standing dwellings hit record levels over the year-ended March 2021, as a massive 137,991 separate approvals saw a year-on-year lift of 31.4%. The emphasis on houses, dwarfed all other housing formats, with total approvals lifting 15.5% to 203,280 separate approvals.
There are doubts about whether all of the approvals will ultimately be financed and built. The stimulus, low-cost debt and time bound orgy of approvals may end up being a matter of regret for some potential home-owners and some in the supply chain, but the simple reality is that housing is booming right now.
The chart below demonstrates just how dominant free-standing houses are at all times, but especially right now. Over the last year, they accounted for a stupefying 67.9% of total approvals.
Given the supply chain challenges faced in building houses right now, it is pertinent to examine the dwelling approvals data on a monthly basis. It is not just, as the chart below accentuates, the size of the growth in approvals, it is the pace at which those approvals have landed that is stretching supply chains beyond their limits.
Like everything else, the housing market is not one homogenous whole across the nation. We can see this amply demonstrated in the chart below, which shows that the last year has been especially favourable to the resource states – Western Australia (the teal bar) and Queensland (the green bar).
Albeit coming off a depressed base, WA’s approvals lifted a huge 67.2% over the year-ended April 2021, while Queensland’s approvals rose 24.3% over the same period. Even pandemic-locked Victoria (which still sees the largest volume of approvals each year), experienced a 5.0% increase over the last year.
WA’s details provide some instruction on the importance of ‘the house’ in the domestic economy. As the data shows, other than a couple of approvals of large towers (>9 Storeys), the only approvals growth was for houses in Western Australia. All other formats are essentially irrelevant there, even more than in most of the rest of the country.
As Michael Bleby wrote in the Australian Financial Review in early June, the pipeline is full, is likely to remain full and will continue to provide a boost to economic growth, even as the HomeBuilder stimulus program comes to an end.
Though the regions are experiencing their share of the total lift in approvals and some are considering moving further afield than the established centres, the reality is that major cities are the soak for the national population and it is in and around them that most dwelling approvals will continue. As Robert Harley outlined in the Australian Financial Review, also in early June, the evidence shows net additional population drives towards our major cities at a disproportionate rate.
Of course, right now the population is stagnant because we don’t have net overseas migration working in our favour. But when it returns, the likelihood is that any new approvals that arise will do so in and around the capital cities.
The approvals might slow down, but the work it seems, has only just begun!