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Did residential building approvals peak in 2015?

Did residential building approvals peak in 2015?

Approvals for new residential homes spiked in December but were down overall for the year, according to the latest ABS figures.

Approvals for new residential homes saw a big spike in December, but were down overall in 2015, according to official figures from the Australian Bureau of Statistics (ABS).

Close to 18,900 new residential dwellings were approved for construction in the last month of the year, up a seasonally adjusted 9.2% on November. Multi-unit approvals rose by 13.5% and detached houses by 5.7%.

But over the year, multi-unit approvals were down 8.3%. Detached houses were up 3.4%, but combined the total number of residential building approvals fell in 2015 to be 2.5% lower than a year ago.

The roughly 232,000 dwellings approved over the year were evenly split between units and houses.

And despite the year-on-year fall, approvals remain close to record high levels, according to CoreLogic RP Data.

“The rising prevalence of high-rise approvals over the past few years [has been] largely at the expense of townhouses,” said CoreLogic research analyst, Cameron Kusher.

“More recently there has been a slight easing of high-rise unit approvals, however developers are still overwhelmingly seeking more high-rise approvals than approvals for low-rise or townhouses – from their perspective the returns are much higher building to high than medium density.”

Where next for building approvals?

Michael Workman, Commonwealth Bank senior economist, notes that while “the larger population states of NSW, Victoria and Queensland remain the major drivers of the residential construction boom … there is still considerable activity in the regional centres”.

Annual approvals are at a record 66,700 in the Premier State, with Sydney, Melbourne and Brisbane all seeing a record number of unit approvals.

But Kusher warns that “with sales volumes slowing, offshore demand reportedly slowing, investor activity reducing, value growth slowing and concerns of an oversupply in certain areas, it will be interesting to see how many of these projects go ahead”.

He adds: “The fact that rental yields have pushed to record lows and rents are unchanged over the year is also likely to act as a further deterrent for buyers of new off-the-plan property.”

Workman predicts national approvals may be around 210,000 for 2016, down almost 10% on last year’s figures.

Where to next?