Australian building approvals tanked in August, led by a steep drop in units.
This chart goes someway towards explaining why.
From ANZ Bank, it shows approvals to build new units in Victoria, essentially the potential pipeline of new supply in Melbourne.
Whether measured in seasonally adjusted or less-volatile trend terms, they fell off a cliff in August, dropping 35% after seasonal adjustments, leaving the decline on a year earlier at a massive 46%.
Both measures now sit at multi-year lows, all but pointing to an end to Melbourne’s high-rise construction boom in the period ahead.
“[This] likely reflects the more difficult financing conditions the sector is facing,” said Felicity Emmett, Senior Economist at ANZ.
According to the RBA, recent discussions with developers indicated that “off-the-plan sales of new apartments in the major east-coast cities had declined over the preceding year as a result of weaker demand from domestic investors and foreign buyers”.
That feedback fits with the latest Performance of Construction Index (PCI) released by the Australian Industry Group’s (Ai Group) which revealed activity levels in the apartment sector deteriorated at the fastest pace in nearly six years in September.
“Apartment builders indicated that activity was being driven lower in response to project completions, reduced inquiries and falling investor demand,” the group said.
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