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HIA Dwelling Approvals (10 September 2013)

HIA Dwelling Approvals (10 September 2013)

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Published by: leithvanonselen on Sep 10, 2013
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Housing Industry Association Ltd79 Constitution AveCampbell ACT 2612p 02 6245 1393f 02 6257 5658hia.com.au
The Profile for Residential Building Approvals byType and Geography
September 2013
Residential building approvals have embarked on what can best be described as avariable path of recovery over the past 12 months, illustrated by the chart below. Withthe 2012/13 financial year recently concluded, and the first update to approvals in thenew financial year generating much comment and conjecture, it seems timely toconduct a comprehensive update on residential building approvals across the country.Total residential building approvals reached 158,111 in financial year 2012/13, quite amodest increase of 5.5 per cent on the very weak year that was 2011/12. Following twoconsecutive monthly declines at the end of 2012/13, approvals started the new financialyear with a partial recovery, increasing by 10.8 per cent in the month of July 2013.
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Monthly Building Approvals -Australia
Source: ABS 8731
Seasonally adjusted Trend
Key Points:
 
Our updated investigation of ABS building approvals finds that totalresidential building approvals have embarked on a path to recovery over the past 12 months.
 
The detail that underscores the aggregate improvement reveals somedivergent trends across geographical areas and also type of residentialbuilding approval.
 
Affirming a view that HIA has held for some time are the performances of New South Wales and Western Australia, which are driving the aggregaterecovery, while South Australia is also aiding the positive results.
 
Approvals for lower density dwellings are showing some promising signs.
 
Approvals for medium to higher density dwellings have at best beentracking sideways and could be pointing to some risks in this segment of the market.
 
 
HIA Economics Group Research Note
 –
September 2013
 –
Residential Building Approvals: profile by type and geographyPage 2
HIA has held a view for some time now that the overall recovery in new home building is quite narrowlybased, with the key drivers (in geographical terms) limited to New South Wales and Western Australia.Residential building approvals continue to be an important leading indicator that informs this view.In NSW, total approvals reached 39,229 in the 2012/13 financial year, a level that is a very solid 10.6 per cent higher than in the previous financial year. The improvement in WA across these periods was animpressive increase of 28.5 per cent. The similarly large markets of Victoria and Queensland, however,have remained conspicuously absent in their contributions to the aggregate recovery. Approvals inVictoria declined by 4.0 per cent over 2012/13 but to a still relatively
‘okay’
result of 48,379. In Queensland7.0 per cent growth over the last financial year might appear respectable, but this was to just 29,541approvals that year. That level is 22.1 per cent lower than the 12-monthly average over the 2000s, anaverage which still includes the fallout from the first iteration of the GFC and also the fallout from theintroduction of the GST.The results are mixed across the other jurisdictions. In South Australia there are signs that approvals areclimbing out of depressed levels that followed a sharp decline which spanned two years. Over the 2012/13financial year, total seasonally adjusted approvals increased by 1.4 per cent. In the Northern Territory therise in approvals was 26.5 per cent, such that the trend of improvement continued for a second year. InTasmania there are at best very tentative signs the sharp declines that have characterised the past threeyears have found a floor. Nonetheless over the 2012/13 financial year total approvals declined by 16.8 per cent. Approvals in the Australian Capital Territory also declined over last financial year 
 –
by 23.8 per cent(in original terms). Nonetheless, the level this represents can still be described as healthy
 –
11.4 per centhigher than the 12-monthly average of the previous decade.The most recent July 2013 result in residential building approvals across the states can now be digestedagainst that broader backdrop of the 2012/13 financial year results. In July 2013, total seasonally adjustedbuilding approvals increased in Tasmania (+24.7 per cent), Victoria (+22.2 per cent), the ACT (+12.6 per cent
 –
trend terms), WA (+9.8 per cent), SA (+9.7 per cent), and the NT (+4.0 per cent). Residentialbuilding approvals fell in NSW (-6.7 per cent) and Queensland (-4.0 per cent).The geographical breakdown of residential approvals goes a long way to understanding the underlyingdynamics of the national recovery, while a further breakdown of approvals by type at this juncture is alsovery illuminating. A number of jurisdictions have seen large booms in approvals for mid to higher density dwellings so wemight expect some moderation in those markets and a shift back toward lower density product. The tableand discussion below seek to shed light on the dynamics of differ 
ent states’ approvals by type.
Relative ImportanceDetachedSemi-detached1 and 2 storey3 storeys4+ storeysAll
NSW 19.1 49.7 -57.1 24.0 -14.6 7.6VIC -6.7 52.1 -65.0 20.9 -56.6 -18.8QLD -2.2 51.7 -13.5 18.7 19.3 7.3SA 24.2 1.7 -30.0 131.6
O
30.5WA 61.1 123.5 18.8 -33.3 16.0 57.3TAS -0.5 -43.9 -49.5
O O
-12.7NT -23.7 75.0 466.7 -100.0 -5.0 -8.7 ACT -5.6 253.0 -64.2
O
-46.9 9.3National 11.7 56.7 -39.0 43.8 -28.9 4.6
Building approvals by type, by region - % change July 'qtr' 2013 vs July 'qtr' 2012
Source: ABS Building Approvals
 
 
HIA Economics Group Research Note
 –
September 2013
 –
Residential Building Approvals: profile by type and geographyPage 3
Detached house approvals 
 
62% of total approvals compared with ten year average of 59%
 
Showing signs of an improving trend
 
Geographical drivers of NSW and WA
Detached house approvals, while accounting for the majority share of the total, have endured a declineover the past three years. The level at which they most recently troughed was the lowest since the sharpdrop that followed the introduction of the GST. As suggested by the table above however, there appear tobe greenshoots of a recovery (although with a very long way to go) emerging on a national level.
 Approvals in the July 2013 ‘quarter’ were 11.7 per cent higher than (the very low
base) in the same period12 months previously. This aggregate improvement has been driven by the larger markets of NSW andWA, where detached house approvals increased by 19.1 per cent and 61.1 per cent, respectively. Further context is warranted here; in NSW the improvement is off a very low base
 –
the result of a decade-longdecline, similarly in WA the base is very low as approvals fell sharply in mid-2012 due to problemsstemming from the state
s amended building act. While Queensland recorded a 2.2 per cent annualdecline in the July 2013 quarter, the broader trend appears to be that the decline which commenced in late2008 has at least found a floor. Victoria and Tasmania are showing continued declines, with approvals inthe July 2013 quarter down by 6.7 per cent and 0.5 per cent, respectively, from the level 12 monthspreviously. In the two territories the quarter-on-quarter results were also in the red; -23.7 per cent in theNT and -5.6 per cent in the ACT.
Semi-detached and townhouse approvals 
 
15% share compared with ten year average of 12%
 
Currently trending upwards
 
Broad-based improvement, SA and Tasmania the exceptions
 Approvals for the lower density product of semi-detached, row or terrace houses and townhouses accountfor a sizeable 15.4 per cent of total approvals. As indicated by the table above this is a segment that hasexhibited quite broad-based growth. Most jurisdictions have seen approvals in this category start to trendhigher in just the last 6-12 months. The two exceptions have been SA and Tasmania, where an overalldownward trend has persisted for two years in both states. While the table above shows a marginal rise of 1.7 per cent in the July 2013 quarter compared with the July 2012 quarter in SA, it would be pre-emptive tolabel this as heralding a turnaround in the prevailing trend of decline. Looking at how the other states andterritories fared across these periods; approvals more than doubled in the ACT and in WA (up by 253.0 per cent and 123.5 per cent, respectively), the next strongest increases were in the NT (+75.0), Victoria (+52.1per cent), Queensland (+51.7 per cent), and NSW (+49.7 per cent). Approvals in this category declinedby 43.9 per cent in Tasmania.
Approvals for units in 1 or 2 storey buildings 
 
2% share compared with ten year average of 3%
 
Most recent trend of rapid expansion may be showing signs of slowing
 
Trend of expansion has been geographically broad based, SA and ACT the exceptions
Out of total approvals, this lower medium-density product accounts for a very small share. Nationally thiscategory has experienced large swings in the past four years. A broad perspective shows that currentlevels are still historically high, with approvals in the 12 months to July 2013 87.3 per cent higher than inthan the previous 12 months. This situation has largely been driven by developments in the larger easternseaboard states as well as in WA. Indeed all jurisdictions bar SA and the ACT experienced strongincreases in approvals levels in the 12 months to July 2013 compared with the previous 12 months.

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