In a blog post produced a few weeks ago (HERE), we highlighted that the number of dwellings approved for construction reached an all-time high over the year to November 2014 with almost 200,000 approvals registered nationally. Over the year house approvals were up 3.6% compared with an 18% increase in the number of multi-unit dwellings approved.
The record level of housing supply in the pipeline comes at a time when population growth (ie housing demand) is winding down and some of the heat is coming out of the housing market.
A deep dive on the Australian Bureau of Statistics approvals data pinpoints exactly where the bulk of the development pipeline from the past year is geographically concentrated. At a broad level we can see the majority of new dwelling approvals are located in Melbourne where 44,633 new dwellings have been approved for construction over the 12 months ending November 2014. Melbourne dwelling approvals accounted for 23% of all approvals nationally and 31% of all approvals across the combined capital city metro areas.
Sydney was close behind, recording just over 39,000 new dwelling approvals over the year. 67% of all approvals across the Sydney market were for multi-unit dwellings (the highest proportion of apartments approved of any capital city).
While new housing supply should generally be viewed as positive and a necessary factor in the Australian housing market and economy, areas where the approved supply pipeline are out of alignment with demand can offer up an element of risk. We recommend that prospective buyers factor supply levels into their housing market analysis and undertake additional research where they fear an area may be in oversupply or at least moving in this direction. The number of multi-unit dwellings, particularly in Melbourne and Brisbane are hovering around record highs. Of course demand for this type of product is increasing but there are risks associated with too much new development of this product type, particularly given values are rising and population growth is slowing.
Eight of the top 20 SA3 regions, based on the number of dwelling approvals over the year to November 2014, are located in Melbourne; five are located in Perth, four in Sydney, two in Brisbane and one in Canberra.
The tables and maps below highlight exactly where the largest amount of new housing supply is in the pipeline.
Seven of the top ten SA3 regions showing the most dwelling approvals across Sydney have a strong bias towards multi-unit dwellings, with the Inner Sydney region topping the list at 2,631 new apartments approved over the twelve months to November 2014. Within the inner city region it is the Waterloo-Beaconsfield area that is attracting the most developer interest. These suburbs account for 1,047 (or 41%) of the apartments being developed across the Inner Sydney SA3 region. Several areas around Sydney’s inner ring are attracting very little in the way of densification over the past year. The Manly region has only recorded 48 new dwelling approvals over the past year and similarly, Leichardt has recorded only 65 new dwelling approvals. Towards the outskirts of the city, the regions attracting the largest supply pipeline are Parramatta (1,558 new unit approvals over the past year and 119 house approvals) as well as the Bringelly-Green Valley region which is seeing an influx of new detached housing approvals (1,449).
Melbourne’s inner city tops the nation with the majority of new dwelling approvals, recording just over 5,000 new apartment approvals over the past year. The high approval reading comes after 3,725 apartments were approved in the same region over the previous year as well as 5,419 the year before that. More than half of last year’s approvals across the Melbourne Inner City were located in the Melbourne CBD (2,418) followed by North Melbourne (682) and Docklands (657). Outside of the inner city, the majority of new dwelling approvals across the Melbourne metro area have been located in the outer fringes and are primarily detached dwellings. The Whittlesea-Wallan region has recorded the second highest number of Greater Melbourne dwelling approvals over the twelve month period at 2,956 of which 83% were detached dwellings. The data shows that the densification taking place in the Melbourne housing market is very much focussed within the inner city core.
The Brisbane Inner North SA3 region has recorded the third highest number of new dwelling approvals of all SA3 regions nationally over the 12 months to November 2014. 2,981 new apartment approvals were recorded over the year and 117 house approvals. The suburbs of Bowen Hills and Newstead comprise the majority of these approvals with 1,535 new apartments approved for construction over the twelve month period. The Inner City region also recorded a high number of multi-unit dwelling approvals, with 1,881 new apartments approved for construction over the year. Outside of the state capital, the regional city of Townsville recorded the third highest number of dwelling approvals across the state over the twelve month period, with 1,228 houses and 410 apartments. Interestingly, the resource-intensive regions of Mackay and Gladstone-Biloela, where market conditions have softened substantially, have also made it into the top ten for the state for new dwelling approvals over the year.
Slightly less than one third (31.3%) of all new dwelling approvals across Adelaide were for multi-unit dwellings over the twelve months ending November 2014, with the city having a clear preference for detached dwellings. The largest supply pipeline, based on approvals over the twelve month period, can be found in Onkaparinga where 1,103 new dwelling approvals were issued over the year. Most of the approvals were at Seaford (418), Aldinga (164) and Christies Beach (132). The Charles Sturt region was the only other SA3 in South Australia to record more than 1,000 approvals over the year.
At a time when the Perth housing market is slowing down, new dwelling approvals have moved to historic highs. The SA3 region of Wanneroo ranks as number two nationally for dwelling approvals, with 3,406 new homes approved for construction over the twelve months to November 2014. The Swan region ranked second highest across Western Australia and 8th nationally with 2,557 new dwelling approvals. The urban form of Perth housing continues to be mostly focussed on detached housing, with only 23% of new dwelling approvals being for multi-unit dwellings (only Hobart shows a lower proportion at 11%). With home value growth slowing and both sales volumes and rents falling, buyers of new homes, particularly if they are buying for investment purposes, should be cautious.
Despite recording the lowest number of dwelling approvals of any state or territory over the twelve months ending November 2014, dwelling approvals across Tasmania have been trending higher to reach their highest point since early 2012. The most significant level of approval activity over the twelve months to November last year was located in the north of the state at Launceston where 329 dwellings were approved for construction.
58% of Darwin dwelling approvals over the twelve months to November 2014 were for multi-unit dwellings, the highest proportion of apartment approvals outside of Sydney. The largest development pipeline, based on dwelling approvals over the twelve month period, was at Palmerston with 818 new dwelling approvals a majority of which were units.
The annual number of dwelling approvals has been trending lower across the Australian Capital Territory since early 2014 as housing market conditions broadly soften across the national capital. The Gungahlin region remains the most popular location for dwelling approvals across the Territory, with 2,160 new dwelling approvals over the twelve month period ending November last year. That figure is almost three times higher than the next most popular SA3 location, Cotter-Namadji, where 762 dwellings were approved for construction. Buyers and developers of new stock should be cautious given that values, sales volumes and rental rates are currently falling in Canberra.