Housing data sends mixed messages

Australia’s monthly housing data appears to indicate the longest new dwelling boom in history has ended, while still recording record annual approvals, driven almost exclusively by the continuing growth of 4+ storey apartments. Although total approvals grew 15.5% to the end of November 2015 on a year-on-year basis, they declined by 0.7% in November, compared with the prior month.

The chart below shows that total residential dwelling approvals peaked at an annualised 230,777 separate dwellings for the year-ended October 2015, dipping to 229,156 separate dwelling approvals for the year-ended November.

2011 to 2015 - Australia Residential Dwelling Approvals

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While it has not crashed, the boom appears to be over and is signalled in the observable downturn in approvals of free-standing dwellings. The more modest declines in 4+ storey apartment approvals is a telling factor.

Historically, this boom, as it nears its end, will be relevant because of its remarkable durability and the likelihood (but not the certainty) that it will end without a major crash. However, the true significance of this boom is likely to be the means by which it has been delivered, rather than its strength and length.

That is, as the chart below shows, the rise of apartments in buildings of 4+ storeys will be the story. This is because they have delivered the boom, but also, because their materialisation signals a change in housing patterns that will continue after the boom ends.

2013 to 2015 - Total Dwelling Units Approved by State

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As the chart indicates, over the last three years, growth in dwelling approvals in 4+ storey buildings has been staggering, growing 49.8% year-on-year for the year ended November. Total dwelling approvals grew 15.3% over the same period.

Most significant, especially in historical context, is that record approvals of 229,156 dwelling units for the year-ended November 2015 saw free-standing house approvals fall to 50.4% of the total from 57.3% of the total a year earlier. The table demonstrates that this is due, exclusively, to the rise and rise of large apartment blocks.

In fact, over the last year, one, two and three storey flats and semi-detached single storey approvals all declined.

In 2016, even as the housing boom slips away, attention will remain on the balance between free-standing houses and apartments in larger buildings.