Low Density Housing on the Comeback Trail

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Thursday, September 19th, 2013
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Coming off a low base, the market for detached and semi-detached housing in Australia now appears to be making a comeback.

The latest research by the Housing Industry Association (HIA) shows growth in this segment has been the primary driving force behind the recent upturn in residential construction.

An investigation of 2012/13 building approval data from the Australian Bureau of Statistics shows that while approvals in most categories of the multi-residential sector are slowing or tracking sideways off a high base, the number of stand-alone houses approved for construction throughout the financial year just past rose by 11.7 per cent. Furthermore, that for semi-detached housing (townhouses, row or terraced houses, etc.) surged by a whopping 56.7 per cent.

On a combined basis, these low-density categories accounted for 77 per cent of all houses approved throughout that period – well above their 10-year average of 71 per cent.

The growth is driven by New South Wales and Western Australia, where approvals in the detached house segment jumped 19.1 per cent and 61.1 per cent respectively – albeit with data in these two states coming off a low base and the comparative figure from the latter having been impacted by difficulties associated with amendments to the Building Act in 2011/12.

Building Approvals by Type

The latest figures come as a number of states embark on reforms to free up land for residential use, measures which are largely expected to spur further detached house development.

In April, for example, the New South Wales government released a white paper outlining plans to streamline approval processes for developments which fit within local planning schemes, identify key suburbs and areas for development and deliver a long-term metropolitan strategy for Sydney.

Recent reforms in Western Australia, meanwhile, aim to ease restrictions on occupancy and size of ‘granny flats’, reduce the size of lots upon which approval for single house construction is required and place greater emphasis on local development plans.

HIA economist Diwa Hopkins says the latest figures show signs of growth in low-density housing after a decade of soft activity in that sector, with growth in New South Wales accounting for a significant portion of the gains.

She says prior to some of the recent reforms, part of the explanation for weakness in detached housing over the past decade lay in planning issues, including a push toward urban infill in New South Wales amid issues with available land supply in that state and a move in Victoria toward higher density living around transport hubs.

“We are seeing more signs of growth in this part of the market off the back of very depressed levels in key markets,” Hopkins said.

“In New South Wales in particular the detached housing market has been on a trend decline for about a decade. So we would expect following that and in conjunction with the planning reforms that we have seen in recent times in that state, there would be greater potential for growth there and we are starting to see early signs of the greenshoots of what we hope will be a recovery in that part of the market.”

Building Approvals by Statee

In its analysis, the HIA noted that overall approval numbers across all market segments throughout the country rose by 5.5 per cent over the past financial year.

Furthermore, while most of the growth has been centred around New South Wales and Western Australia, some positive numbers are starting to come through in South Australia.

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