Tighter credit conditions and the fall in residential valuations has put a handbrake on Residential Approvals with only 4,162 apartments approved in December, a 5 year low.
Seasonally Adjusted Building Approval data released today by the ABS showed a decline of 27% in total dwellings approved in December 2018 compared to December 2017 with major declines in each of Sydney (-22%), Melbourne (-31%) and Brisbane (-38%).
Melbourne's decline in approvals was predominantly in the apartment market with a 49% drop in approvals for the month of December. Melbourne has had a strong run of approvals with the number of apartment approvals in 2017/18 however the last months has reversed the trend with total approvals over the last 12 months now down 17% on a moving annual basis. Melbourne houses showed a large drop in November (down 4%) but remain 3.9% higher for the 12 months.
Approvals in Brisbane contracted across both the houses and apartments markets with the monthly decline at -32% and -45% respectively. Brisbane has now seen a decline in total approvals over the last 12 months by -4%.
Sydney continued a 2 year decline in approvals with the monthly number down -22% on last month, whilst the total over the past 12 months is down -13.1% compared to the previous 12 months. Sydney apartments approvals are down -19.1% for the 12 months and houses have now moved into negative territory with a -0.9% decline for the 12 months.
The implications for the economy are significant with residential construction activity likely to fall further in 2019. In the medium term, the lack of construction will lead to increased rents for existing dwellings however the current oversupply in some markets may take some time to absorb.