The boom in the red-hot apartment building sector appears to be tapering off slightly as approvals for multi-residential construction appear to be slowing down.
The latest data from the Australian Bureau of Statistics suggest that on a seasonally adjusted basis, the overall number of multi-residential dwellings (townhouses, units, apartments etc.) approved for construction dropped by 16.2 percent in September to come in at 9,234 – the third lowest level on record since October 2014.
Leading the fall was Victoria and Queensland, which saw multi-residential dwellings approvals fall off 30 percent and 28 percent respectively albeit both off high bases whilst multi-residential approvals also dropped 19 percent in New South Wales off a high base.
Multi-residential approvals rose by 13 percent and 42 percent in South Australia and Western Australia but both from low bases.
At 2,045, the seasonally adjusted number of residential approvals in Victoria was at its second lowest level on record for at least two years, whilst Queensland multi-residential approvals (1,745) were at their second lowest level since November 2014.
Markets are also extremely soft in South Australia and Western Australia notwithstanding monthly increases in those markets.
On a quarterly basis, seasonally adjusted multi-residential approvals in South Australia fell by 33 percent from 1,056 in the June quarter to just 708 in the September quarter, whilst quarterly multi-residential approvals in WA are down by 32 percent compared with the same quarter in 2015.
That said, last month’s overall decline in approvals nationwide should be put into perspective in that it was coming off two very strong months.
Indeed, throughout the September quarter, the seasonally adjusted number of non-detached dwellings which were approved for construction increased by 6 percent and stood at a record high level of 31,954.
The latest data comes amid concerns about overheating in apartment markets over recent years and an oversupply of stock, especially in Brisbane and Melbourne.
In Brisbane, for example, the rental vacancy rate stands at just above the three percent level which many commentators view as the level of a balanced market from a supply and demand perspective whilst in Melbourne, vacancies sit just below that level.
Both cities are expecting big increases in the level of available stock in coming years amid high levels of construction activity in recent years.
Outside of the multi-residential sector, detached house approvals increased by 2.3 percent, meaning that overall levels of dwelling approvals dropped by only 8.7 percent in the year.
Housing Industry Association Shane Garret said the volume of work in the pipeline remained high notwithstanding the latest fall in approvals.
“Despite the large drop in multi-unit dwelling approvals during September, the volume of approvals in this segment of the market is still at very high levels by historic standards – this means that the immediate pipeline of work will remain very elevated on the apartment side,” Garrett said.
Master Builders Australia National Manager Housing Matthew Pollack said talk of emerging oversupply had created a more cautious attitude amongst some developers.
“However, Master Builders would caution against being overly bearish on the prospects of inner-city apartment markets while auction clearance rates remain high, rents are growing and house prices continue to march forward,” he said.