New dwelling approvals rose a stronger-than-expected 0.9 per cent in October, indicating continuing strength in the housing pipeline and causing economists to upgrade their expectations for housing construction.
The monthly increase lifted total dwelling approvals to a seasonally adjusted 19,074 as approvals of detached dwellings rose 1.9 per cent and the grouping of attached dwellings – apartments, townhouses and semidetached homes – slipped just 0.2 per cent.
October housing approvals continued to hold up better than expected,’’ said Ivan Colhoun, NAB’s chief market economist. ‘‘Apartment approvals have weakened in Queensland and Victoria, but are holding up at high levels in NSW and overall have broadly stabilised.’’
Falling apartment approvals masked signs of growth in the medium-rise segment. In a clear sign of changing living expectations, new approvals of townhouses reached a 20-year high.
‘‘Aussies are continuing to downsize, reflecting an ageing population, preference for smaller living spaces and inner-city convenience, rather [than] contending with the maintenance associated with large backyards,’’ CommSec senior economist Ryan Felsman said.
On top of recent housing finance and population data, the results continued to reaffirm a more positive outlook for total dwelling construction over the short term, said BIS Oxford Economics managing director Robert Mellor.
Industry is responding to the signs. Earlier this week, the Housing Industry Association increased its forecast for housing starts this year to 195,000 from its previous forecast of 184,000, to reflect stronger-for-longer housing construction. Yesterday, Master Builders Australia did the same.
‘‘Six months ago we were saying we expect the trough in new housing construction to be around 180,000 new commencements in 2018/19,’’ the lobby group said. ‘‘But this might now be more like 190,000 and not hit us until 2019-20.’’
But while the longer-term outlook for housing construction improved, there were signs of short-term pain for the wave of high-rise apartment projects being completed over the next 18 months.
Some developers who had overpaid for land in recent years were likely to ‘‘take a bath’’ from settlement failures as the Sydney housing market slowed, said Adrian Harrington, the head of funds management at Folkestone Asset Management and a nonexecutive director of the Australian Housing and Urban Research Institute.
‘‘It’s definitely slowing but the issue is the development feasibilities that the developers have done,’’ he said at Ahuri’s National Housing Conference.
