New detached home building reaches its highest level in Australia for 15 years

The number of approvals for new detached homes in Australia has reached its strongest level for 15 years at a time when demand is increasing, new data shows.

In the three months to April 2018, a total of 31,562 new detached houses were approved for construction, the most in any three month period since 2003, and 9% higher than in the same period a year ago.

‘The performance of the detached house building market is remarkable. The volume of house approvals during the three months is considerably higher than a year ago, a time when it was already elevated,’ said Shane Garrett, senior economist with the Housing Industry Association (HIA).

‘Strong demand for new houses is being sustained by healthy rates of population growth, itself a product of robust labour markets in Australia’s largest cities,’ he added.

But Garrett also pointed out that there are risks on the horizon for new home building. ‘It appears that the banking Royal Commission has already led banks to increase their scrutiny of mortgage lending. If this results in a protracted disruption to the mortgage market then there are likely to be ramifications for the home building industry,’ he explained.

In particular, he pointed out that the new apartment sector is not doing as well. After posting a strong end to 2017, approvals for apartment fell by 9.4% over the three months to April. But he added that it is still comparable with the same time last year.

‘The apartment market remains under pressure due to the stiffer tax burden on foreign buyers in most states as well as tighter regulatory conditions. These interventions represent a real risk for the house building industry,’ he added.

A breakdown of the figures show that the ACT saw the largest expansion in new home approvals during April 2018 with an increase of 39.2% compared with a year earlier. Over the same period, approvals grew by 25.8% in Victoria, by 15.2% in Tasmania and by 1.9% in South Australia.

However, building approvals fell in four markets over the year to April, down by 11.5% in Queensland, down by 6.6% in the Northern Territory, down by 5.4% in New South Wales and down by 3% in Western Australia.