New home building activity starting to shift from Melbourne to Sydney: ABS figures

Home building activity is heading in opposite directions in NSW and Victoria. 

Building approval data released by the ABS for January indicate that home building activity is trending down in Victoria with NSW finally closing the gap on its state rival. 

“Trend growth in Victorian building approvals remained negative in January (and has been negative since August 2012), indicating that Victorian building activity will continue to slow from the recent peak in the coming months,” says Ivan Colhoun, head of Australian economics and property research at ANZ. 

“In contrast, steady growth in NSW building plans has driven trend approvals to the highest level since mid-2005, narrowing the gap between Victoria and NSW trend building approvals to the smallest margin in almost six years. 

In its analysis of the January ABS figures, the Urban Taskforce also notes a shift towards NSW with a major boost in apartment approvals in the state over the month.

“In January 2009, only 600 apartments were approved while the January 2013 figures indicate over 2,000 approvals,” says Urban Taskforce chief, Chris Johnson. 

“NSW is clearly leading the country in the approval of apartments as these become a preferred housing type for many people.”

However, Johnson says that national approvals for all housing were flat as were approvals for the detached housing in NSW. 

“NSW Government needs to ensure that planning rules help the apartment market particularly in inner city areas of Sydney. 

“We are hopeful the White Paper and the Metropolitan Strategy, due out soon, will help with planning approvals for apartment buildings particularly in Urban Activation Precincts,” he says. 

Commonwealth Bank economist Michael Workman notes building approvals fell in Victoria by 2.6% in January, but highlights that the state still accounts for over 30% of national building approvals “suggesting housing supply in the state will be plentiful in 2013”. 

Building approvals were down in NSW (?1.3%), Queensland (?5.8%) and SA (?3.2%).

Tasmania bounced by 13.9% over the month. 

On a through?the?year basis, approvals were up in NSW (14.3%), Vic (3.8%) and Qld (12.0%).  Approvals were down in SA (?2.6%) and Tasmania (?23.9%). 

The Housing Industry Assocation (HIA) described the January figures as "disappointing".

“Building approvals in January 2013 fell for a second consecutive month, dropping back below the 13,000 mark,” said HIA chief economist, Harley Dale.

“The headline January decline of 2.4% would have been weaker if there hadn’t been a 3.3% rise in detached house approvals, a component that continues to miss the mark overall.

"Even with that monthly rise, approvals for detached houses were still down by 1% over the three monthsto January,” said Dale.

Peter Jones, Master Builders Australia’s chief economist said the January building approval figures do little to suggest a strong recovery is on the horizon for the industry. 

“New homebuyers still seem reluctant to commit and new dwelling approvals remain weak, despite being up a fraction on the previous trough. 

“The industry just can’t seem to pick itself up off the mat at the moment. The rise in private sector houses is certainly welcomed, but comes after three consecutive falls. There is a long way to go to overcome the negative trend that has developed again," said Jones.