From Callam Pickering at locked-BS:
The continued growth in building approvals will be a welcome sight for the Reserve Bank of Australia, which is relying on the housing sector to fill in some of the hole left by the impending decline in mining investment.
Residential investment will certainly pick up over 2014, but how strong are building approvals? Are we facing a residential construction boom? Probably not.
…much of the recent growth has been in higher density living. The construction of units is generally cheaper than for the same number of houses — think economies-of-scale — and also less labour intensive.
The rise in higher density living is an example of a changing social composition and the demand for inner-city living. However, it won’t provide the same boost to the economy that we would have seen in earlier cycles that were driven by approvals for detached housing. The construction sector will also not see the same boost in employment.
Correct. I also fear that because much of the demand is foreign, if we do hit a speed bump it will reverse quickly, leaving a sudden surplus, especially in Melbourne.
