Tighter credit conditions and the fall in residential valuations has put a handbrake on Residential Approvals with Sydney and Melbourne showing major declines.
Seasonally Adjusted Building Approval data released today showed a decline of 32% in total dwellings approved in November 2018 compared to November 2017 with major declines in each of Sydney (-27.9%), Melbourne (-54.0%) and Brisbane (-33.6%).
Melbourne's decline in approvals was predominantly in the apartment market with a 71% drop in approvals for the month of November. 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 15% on a moving annual basis. Melbourne houses showed a large drop in November (down 12%%) but remain 4.2% higher for the 12 months.
Approvals in Brisbane contracted across both the houses and apartments markets with the monthly decline at -38% and -30% respectively. For the past 12 months however, Brisbane continues to see a positive increase in total approvals (up just 0.6%), driven predominantly by detached houses which remain up (by 3.9%).
Sydney continued a 2 year decline in approvals with the monthly number down -10% on last month, whilst the total over the past 12 months is down -12.2% compared to the previous 12 months. Sydney apartments approvals are down -18.3% for the 12 months however houses manage to retain positive growth of just 0.4% 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.