Record low interest rates and a fast growing population have pushed the number of new home approvals to an all-time high in March.
Approvals for the construction of new homes rose 2.8 per cent to 19,419 in March, the highest monthly reading for the figures, which go back to 1983. And it seems we’re quickly becoming a nation of flat and townhouse dwellers instead of homes on the traditional quarter acre block.
The number of multi-unit dwellings approved during March overtook free-standing houses, in trend terms, for the first time. Annual growth for the multi-unit approvals category is now 59.2 per cent, compared to houses which are growing at just 1.6 per cent.
St George chief economist Hans Kunnen said there has been a big move in Australians wanting to live in apartments, townhouses and semi-detached houses.
“While this category tends to be volatile, as a trend, there has been a clear shift towards more higher-density housing in this current upswing,” he said.
Mr Kunnen said the strong growth in new apartment blocks also explains why price growth in that category is lagging behind houses.
“The surge in residential construction is alleviating some of the supply shortages in parts the country,” he said.
“The jump in construction activity within multi-unit dwellings can help to explain relatively weaker price growth of late among units in comparison to houses.”
Housing Industry Association senior economist Shane Garrett said exceptionally low interest rates and strong population were driving a home building boom.
“Were it not for the performance of the residential construction industry, Australia’s economy would be in a far weaker state,” he said.
“New home building continues to benefit from the exceptionally low level of interest rates, as well as strong population growth over recent years in the key home buyer age group.”
JP Morgan economist Tom Kennedy said the continued rise in building approvals should help rein in the strong price rises of recent years, which has been led by Sydney.
“Sydney is definitely outperforming, with very strong population growth not really being matched at this stage by an increase in new homes,” he said.
“That’s part of the reason why we’re getting very strong price growth in Sydney.”
Mr Kennedy added that the rise in building approvals bodes well for the economy in general.
“An increase in building approvals is beneficial and what the Reserve Bank is trying to manufacture, it stimulates growth and is a high multiplier through the economy,” he said.