Australia’s east coast apartment building boom has been getting plenty of attention of late, largely as a result of growing fears of a price-sapping supply glut forming, especially in Brisbane and Melbourne and, to a lesser degree, Sydney.
Finally, there’s tentative evidence that the pipeline for new apartments may be slowing, at least according to the latest set of Australian building approvals for September released by the ABS.
In seasonally adjusted terms, dwellings ex-houses — largely apartments — plunged by 16.3% to 9,166, the lowest monthly total seen this year.
And that decrease was almost entirely driven by weakness in New South Wales, Victoria and Queensland — the epicentre of Australia’s apartment building boom — with approvals tumbling by 23.2%, 31% and 25% respectively in September in original terms.
Though the weakness in apartment approvals in September was broad-based, looking at total apartment approvals over the past 12 months, there’s a clear divergence emerging.
Perhaps heeding warnings about a supply glut, approvals in Victoria and Queensland have clearly rolled over while those in New South Wales have forged higher, totaling 37,199 in the past 12 months, the highest level on record.
Though years of under-building and strong population growth have, for the moment, helped to ease concerns about Sydney’s apartment market, it does beg the question whether that will remain the case should the current trend be maintained.
“After years of underbuilding, Australia now has the prospect of overbuilding which will help moderate some of the issues around housing affordability which covers rents as well as prices,” said Michael Workman, senior economist at the Commonwealth Bank, following the release of the approvals report.
Workman points out that national population growth is still running at 320,000, implying an annual increase in housing demand of around 180,000 per annum.