Housing Density – September 2017

AUSTRALIAN SCENE

BankWest recently published its 2017 Housing Density Report which reveals long-term trends in Australia’s housing density by examining the nation’s dwelling approvals over time. It looks at trends at a state and capital city level by monitoring the number and proportion of medium density dwelling (units, townhouses and apartments) approvals compared to total dwelling approvals. This is contrasted with dwelling stock measured in the 2011 Census to identify areas of increasing housing density. So where around the country is housing density on the rise?

While the long-term trend towards medium density housing remains strong, the short-term trend reveals the largest national decline in the number of approvals for medium density housing in four years. There were 110,471 medium density approvals nationwide in the 12 months to March 2017, down 6.5% in the 12 months to March 2016. Approvals for stand-alone homes also declined by 2.9% over the same period. This short-term decline has been largely driven by uncertainty in Queensland markets, with many apartments being completed and tighter foreign lending terms leading to developers holding off on new medium density construction.

However, despite this short-term fall, over a five year horizon, the number of medium density approvals increased by a significant 99.7%, up from just 55,332 in the 12 months to March 2012. The 2016 Census reveals it was Victoria which had the largest increase in medium density housing in the five years to June 2016, increasing by 24.6%, demonstrating a strong trend towards apartment-living in the state. Western Australia, on the other hand, had the largest increase in stand-alone houses of 7.4% during the same period, reflecting its love affair with ‘a house and a yard’.

Over the 12 months to March 2017, NSW was the only state to register growth in medium density approvals, recording a 5.9% increase during the period. Close to half (48.8%) of total dwelling approvals were for medium density housing in that period, down marginally on the previous year (49.7%).

Symptomatic of the state of the local housing market in Western Australia, the state experienced the largest decrease in medium density housing approvals of any mainland state, with approvals declining by 27.1% to 5,557 in the 12 months to March 2017. Within the state, it was the Cottesloe/Claremont area that saw the largest year-on-year increase in medium density housing approvals. It accounted for 50.2% of total state approvals in the 12 months to March 2017. This was up from just 7.1% the previous year, likely driven a number of local developments such as Claremont on the Park.

NEW ZEALAND

In New Zealand, the latest monthly values report from Quotable Value and new listings data from Realestate.co.nz both indicated that prices were softening around the country. However, ASB CEO Barbara Chapman has attributed the slowing market to the upcoming General Election as well as the Reserve Bank’s loan-to-value ratio restrictions.

“Right at the moment I think we’ve got to realise we’re in the throes of an election period,” Chapman told interest.co.nz. “And we do see that during an election period activity in the market can quieten down. And so I’ve got no concerns with where the market is at the moment. I do think that the Reserve Bank [loan-to-value ratio] restrictions have had an impact and I think that’s been a good thing.”

“I do think that there still is a shortage of housing in Auckland, which puts a floor on any thought of any price falls. We still need more housing stock in Auckland and that will still hold the market high,” said Chapman.

Prime Minister Bill English ruled out allowing the Reserve Bank to introduce further curbs to home lending and signalled it should have a plan to remove some key lending restrictions already in place. The central bank had come under fire from real estate agents saying its LVRs were squeezing buyers out of the housing market even as prices flattened, and in some cases, fell.

In addition to the LVR restrictions, market commentators continue to reflect on the confluence of two additional and oft-seen market-limiters having a strong dampening effect on the market; a cold, wet, long winter and a pending election that, depending upon the result, could deliver market restraints & property tax measures. Buyers are holding back, seemingly afraid of making a move then either losing equity or having additional costs imposed post purchase, while vendors await better conditions and possible increased prices.