Gap widens between apartments and house approvals

The gap between building approvals for detached housing and new apartment construction continues to widen, with apartment approvals falling in July, by 6.7 per cent, adding to a fall over the year-to July 2017 of 15.1% in seasonally adjusted terms.

The boom in apartment construction could not last forever so some correction is to be expected. Different cities are at different stages in their construction cycles but we do expect a fall in apartment construction activity in most major urban centres over the next 12 months or so. Activity has been soft in Brisbane for some time now, Melbourne is also beginning to show signs that apartment construction may be past its peak. Meanwhile we expect apartment construction in Sydney to sustain for a bit longer than its other capital city counterparts, with activity expected to moderate in 2018 and beyond.

On the other hand, detached housing approvals have held relatively steady over the year; down by by 1.5 per cent in Queensland, 0.6 per cent in Victoria, 1.5 per cent in New South Wales.

The latest data still supports an outlook for total dwelling construction to settle at around 180,000 new dwelling per year over the next couple of years. However, if approvals fall much further there is a risk that we could see supply constraints once again push up house prices.