New South Wales remains at the epicentre of Australia’s residential building boom with a mammoth 70,400 dwellings starting construction in the 12 months to September 2016, beating second-placed Victoria with 66,500 over the same period.
However, as this excellent chart from the Commonwealth Bank shows, starts in both states, along with Queensland, remain well above historic norms.
Despite falling 2.8% in the quarter, leaving the annual decline at 4%, dwelling starts across the country totaled 229,3336 in the 12 months to September, marginally below the record annual pace of 231,647 that began construction in the year to March 2016.
And many of them were units.
According to Michael Workman, senior economist at CBA, 111,000 multi-units began construction over the same period, marginally below the 116,000 level for houses. The remaining 2,000 starts were for dwelling conversions.
Given the enormous lift in unit starts, and strength in dwelling approvals in this category up until the middle of last year, it’s little wonder why some are starting to worry about a potential high rise apartment glut forming in the future.
Without passing judgement on that specific concern, Workman says that at the current pace, starts are probably outstripping demand, albeit after years of previous under-building.
“Our estimate for underlying demand for dwellings is around 180k, based on current population growth. So we have been building well above demand for the past few years but it follows 15 years of under-building,” he says.
“We estimate that pent-up demand from that under-building will be largely met in 2017.”
He believes that around 225,000 dwellings began construction in 2016, and expects that total to moderate to around 212,000 in the year ahead.