Building approvals show signs of peaking

Building approvals show signs of peakingBuilding approvals show the first signs of having peaked, with approvals for June down 8.2 per cent on the previous month, according to the latest Australian Bureau of Statistics data.For the months to June 2015, the record-breaking run of building approvals continues, with 220,423 new dwellings approved in seasonally adjusted terms. This is up from 195,302 approvals for the 12 month period to June 2014.According to the Property Council of Australia’s executive director Residential Nick Proud, the run of record approvals over the last financial year has created a pipeline of new housing construction activity that will meet Australia’s needs after years of underbuilding. On average 154,000 new homes are built per year, falling short of the required 2000 to 14,000 homes needed. “The approvals we have seen over the last 12 months will start to make a dent in the housing deficit, especially in Sydney,” Proud says.However, Proud says the signs suggest that building approval figures may have peaked.”With investment loans likely to be lower, the critical issue is to ensure as many approvals are converted to actual builds as possible to boost supply, especially in Sydney where pricing pressures have been predominantly due to undersupply.”The danger is that measures to contain house price growth in Sydney and Melbourne mean new housing drops away in other states. These states have only just come back to moderate, long-term five-yearly average house price growth off the back of recent strong building activity.”Declining investor numbers and new taxes on foreign investment will impact on the number of approvals that progress to construction. It is vital that strong supply is maintained to moderate housing prices particularly in Sydney and Melbourne.”Proud says that governments must focus on supply side efficiencies in land release, improvements to development assessment and reform of inefficient taxes such as stamp duty to support continued supply.