With the ABS yesterday releasing its dwelling commencements and completions data for the June quarter, it’s an opportune time to once again examine how dwelling construction is tracking against population growth at the national and state and territory levels.
The below charts track the following, which are based on the latest available quarterly data:
- Dwelling approvals to June 2016;
- Dwelling commencements to June 2016;
- Dwelling completions to June 2016; and
- Population growth to March 2016.
First, the national picture shows that dwelling approvals have retraced marginally but remain highly elevated, whereas commencements have rocketed as they played catch-up. Completions also surged in the June quarter as they played catch-up with commencements, but still remained far behind. Meanwhile, population growth is also holding just above the GFC low and increased marginally in the latest quarter:
Given that approvals and commencements are near record highs, and the massive gap between them and completions, the overall construction pipeline is huge and dwelling construction nationally could remain at boom-time levels into 2018.
Next is NSW, where after a decade of sluggish construction, approvals and commencements have risen to record levels. Completions also surged in the June quarter, but remain well below commencements. Population growth is also holding at an elevated level:
In VIC, which has long been the construction leader, dwelling approvals and commencements look to have peaked, but both remain at historically high levels. Like NSW, completions surged in the June quarter but remain miles behind. Population growth, however, has strengthened and is running near the highest level on record:
Queensland faces a massive apartment glut. While dwelling approvals and commencements have begun to taper, completions are way behind, suggesting a big pipeline of projects. By contrast, population growth has fallen significantly, despite turning up recently:
The construction cycle in Western Australia has clearly turned. Approvals and commencements are well past their peak and are now falling, whereas completions have only just peaked, suggesting that actual construction levels will now begin to fall. Meanwhile, population growth has crashed through the floor, suggesting the supply-demand imbalance in Western Australia will point to oversupply for some time to come:
While SA’s housing market is reasonably balanced at present, dwelling approvals and commencements have just picked-up as population growth has crashed, whereas dwelling completions have slumped. This suggests an oversupply will develop in the near future:
After a big increase in supply relative to population growth, the worm has turned for the Northern Territory. Supply has fallen back to earth just as population growth appears to have found a bottom. Still, dwelling additions continue to easily outnumber population additions, suggesting further oversupply:
Finally, in the ACT, population growth is running just above the long-term average but so is dwelling construction, with completions soon to play catch-up with commencements:
To summarise, housing gluts appear to be developing across QLD, WA, the NT, and SA although they are at different stages of the cycle.
There’s an unprecedented amount of building going on in Victoria, although population growth is also very strong, partly mitigating any potential oversupply. The construction pipeline is also very strong with commencements remaining elevated and completions lagging by a significant margin.
New South Wales’, like Victoria, is experiencing strong population growth but also a big lift in construction (but off a lower base). Approvals and commencements are at record highs, whereas completions are lagging by a large margin. It could take several years until the dwelling construction boom is done by which time Sydney’s much vaunted “housing shortage” will likely be consigned to the history books.
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