Newly built apartments outnumber houses for the first time on record: Cameron Kusher
Building activity data released by the ABS showed there were more newly built units completed over the December 2016 quarter than houses, the first time on-record this has occurred.
The number of new dwellings approved for construction has recently fallen from historically high levels which will over time result in fewer commencements and completions moving forward.
The latest building activity data for the December 2016 quarter, showed that dwelling commencements and completions were actually higher over the quarter.
Meanwhile, the number of dwellings under construction and the number of dwellings approved but awaiting commencement fell.
Over the December 2016 quarter there were 28,690 new houses that commenced construction and 27,887 new units which commenced construction.
While new house commencements were 3.4% lower, new unit commencements increased by 3.9%.
Since the end of 2016 there has been a substantial decline in house and unit approvals so it is reasonable to expect that dwelling commencements will follow the lead of approvals and start to trend lower over the coming quarters.
In terms of dwelling completions, 28,102 new houses and 28,527 new units completed construction over the December 2016 quarter.
This marked the first quarter on record that more new units had been completed than new houses.
New house completions rose by 0.7% over the quarter while new unit completions surged 26.1% to a new record-high.
At the end of the quarter, there were 64,332 new houses under construction and 152,635 new units under construction.
There has been little change in the number of houses under construction over recent quarters while new unit construction remains historically high but has begun to fall.
Interestingly when you look at the individual state data, the number of new units under construction in New South Wales is continuing to climb to new historic highs while the number under construction in Victoria and Queensland, where concerns around inner city unit supply are more pronounced, is now clearly trending lower.
Finally if we look at the number of new houses and units approved for construction but not yet commenced, there were 9,814 houses and 29,044 units yet to start the construction phase.
The number of new houses approved but not commenced increased by 5.0% over the quarter while the number of new units fell by 11.7% from its historic high the previous quarter.
With dwelling approvals having fallen quite significantly from record high levels since December 2016 it is reasonable to expect that there will be fewer commencements going forward, particularly for units.
Completions on the other hand could remain high for some time given that there are still many houses and units under construction.
New house and unit completions have averaged 43,497 a quarter over the past five years, even if there were no additional new commencements based on this run-rate it would take almost five quarters for the stock to clear.
It is also important to note the fact that the number of units under construction has started to decline in Victoria and Queensland while it continues to rise in New South Wales.
Commencements data shows that the number of starts have also fallen in Victoria and Queensland while they continue to trend higher in New South Wales.
The pull-back in Victoria and Queensland for commencements is probably related to unit oversupply concerns in the inner city areas of the state capitals.
In fact the rate of growth for units is already dramatically lagging that of houses in Melbourne and Brisbane while the same trends are not evident in Sydney.
It is clear that the market is responding to the heightened level of dwelling construction over recent years.
While it appears that in most states commencements are now falling they have continued to climb in New South Wales which ultimately is positive given it is the state with the largest overall undersupply of housing.
Cameron Kusher is research analyst for CoreLogic. You can contact him here.