Issue 22 | October 26th, 2017 | Is New Dwelling Construction Slowing?
Dwelling construction is an important component of the property market, and, is of course important because as our population continues to grow annually we need to have new properties to house that increasing population. We do see that new construction tends to go in cycles and of course we have experienced very high levels of construction for a number of years now. In fact, in Southeast Queensland, the Masters Builders Association show that the number of new dwellings completed in the year ending June 2017 hit 48,151 which was up 25 percent on the previous year and particularly led by a 45 percent jump in apartment construction.
However, we are starting to see the cycle run its course. On a national basis – housing starts of apartments, townhouses and semi-detached dwellings fell to their lowest level in two and a half years in the June quarter. That decline in apartments was contrasted with a 3.3 percent quarterly gain in detached housing starts, which shows that more times than not housing avoids the more volatile ups and downs than the apartment sector experiences. However, even in the housing area construction is starting to slow.
Here in Southeast Queensland, new dwelling starts was down 12 percent over the past 12 months and that is fundamentally caused entirely by the drop off in apartment projects.
As you look around the Gold Coast you will still see quite a number of cranes on the skyline, however, they will start to disappear over the coming months. The Australian Bureau of Statistics figures released recently show building approvals for units in the whole of Queensland was down 41 percent to the end of August, whilst houses again showed a slight rise at 0.5 percent.
What we are clearly seeing is new construction is starting to slow significantly and therefore the fear of oversupply should subside. There are certainly no signs of that here on the Gold Coast and whilst there has been quite a hike in the number of approvals for construction, what we have learnt over the last 40 years is that as much as 40 percent of all approvals never get to construction and so it is always better to focus in on construction starts than any other factor when considering the supply and demand equation.
Why Are Construction Levels Falling?
One of the major reasons that construction levels are falling is simply because it is getting extremely difficult to get finance from banks to develop. This is largely due to tightening regulations by APRA and the banks own self checking processes.
Looking a little further down the track, we will have to be aware that if interstate migration continues at high levels, as does natural population growth, we may well find we are back into a shortage of stock to buy sooner rather than later.
Good News for The Real Estate Market
Some more great news for the real estate market is information released just last week from the Australian Bureau of Statistics which shows trend unemployment rate has now dropped to a four year low of just 5.5 percent and it is the lowest it has been since March 2013. Fulltime employment has increased by around 271,000 peoples since September 16’ and makes up the majority of the 335,000 person net increase in employment over the same period. The trend monthly hours worked increased by 3.1 million hours, resulting in an annual figure showing a strong 2.9 percent growth. More money in more peoples pockets.
Both the aforementioned figures are certainly adding to great stability in the real estate market.
We have just officially launched the Event 2018 which is the largest property marketing exercise of its type in Australia. Its birth child was here at the Ray White Surfers Paradise Group and it is one of the most successful real estate sales days in the country. If you would like a little bit more information about it please have a look at a short one minute video.
We are knocking on the door of November now and are looking forward to a continued strong activity in the market all the way through until Christmas. If there is anything we can help you with please reach out otherwise, as always, best wishes and stay safe.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group