By any stretch of the imagination, the latest building approval figures for multi-residential construction look good – as they do for all forms of building.
At 6,197 (seasonally adjusted), the overall number of multi-residential dwelling units approved for construction in Australia surged by a whopping 58.7 per cent during the month of May and was up by 45.4 per cent compared with the same month last year.
While that would seem to suggest the sector is on the rebound, there are caveats.
First and most obvious is the volatile nature of monthly figures. Because of the project-specific nature of the sector, multi-residential approval numbers tend to bounce around, with sharp increases in individual months often representing approval of a few big individual projects in the month in question as opposed to a general trend.
Indeed, the surge in approvals in May was largely driven by a few significant projects in New South Wales, Victoria and the Australian Capital Territory, and there is no guarantee of the strength of these numbers being maintained in future months.
Furthermore, it is more than likely that May’s numbers are being influenced by the pull-forward effect prior to the end of home buyer incentives in New South Wales and Victoria in June – a factor which would affect both multi-residential building as well as the broader housing market.
To the extent that this is the case, some of this effect may reverse now that the deadline for the scheme has passed.
Third, as is the case with the broader housing sector, activity in multi-residential building may be impacted to some extent by the introduction of the carbon tax, which could cause a slight dampening in demand as housing construction costs increase and consumers remain wary of how the tax will affect their cost of living and financial position.
Still, there is some light at the end of the tunnel for the sector. For one thing, recent reductions in interest rates should help to stimulate multi-residential building along with the broader housing construction market.
Perhaps more importantly, governments seem keen to emphasize multi-residential living at the moment. As part of its budget submission, the South Australian government announced the abolition of stamp duty for the next two years for those who buy apartments in either Adelaide or North Adelaide. In Perth, where housing affordability has become a significant issue in recent times, Lord Mayor Lisa Scaffidi is keen to encourage single first home buyers to look at apartments.
Aside from this, the sector will also derive significant benefits from broader efforts on the part of the New South Wales government to stimulate residential construction in that state.
One month’s figures do not make a trend, though the figures are nonetheless extremely encouraging.
From the viewpoint of the nation’s multi-residential construction sector, as with its broader residential construction sector, there are some encouraging developments going forward.