The apartment boom is slowly losing strength but it is not over yet, with a big jump in approvals by councils for new projects in NSW and Victoria helping to fill a pipeline of work that will keep the construction industry busy into next year.
The 232,600 new houses and apartments winning council approval in the 12 months to November is about 60,000 more than is needed to accommodate the new formation of households each year and is 45% higher than the average before the boom began four years ago.
There had been concerns that tighter lending standards by the banks and a crackdown by the Chinese authorities on wealthy individuals taking money out of the country were causing the flow of new high-rise projects to dry up as approvals fell away sharply in the middle of last year.
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The number of plans for new developments being submitted to councils varies sharply from one month to the next. However, an 18.1% jump in applications for apartment projects in November reversed most of the previous month’s fall.
The 114,700 new apartments approved over the 12 months to November was still 5.2% less than in the previous 12-month period but was double the pre-boom average.
The flow of work on private houses is much steadier, with only a 1.1% dip in the numbers over the 12 months to November and a total of 117,800 new plans approved.
UBS economists say that taking account of the typical lags between projects being approved and construction starting, there should be about 205,000 new dwellings commenced this year and the peak in construction activity will not be until 2018.
As well as lifting the construction industry, the strength of residential construction also flows into consumer spending on household goods.
A note by Citigroup’s economics team says the construction industry will also be supported this year by the delays in building work caused by a wet winter and early spring, and the record level of high-rise apartment approvals, many of which take several years to build.
“The real challenge will come next year as oversupply of apartments becomes more common in a number of key postcodes.”
This article originally appeared on www.theaustralian.com.au/property.