Paul is a co-founder and director of Debuilt Property. Paul has extensive experience in construction, project management, development management and asset management.
The overall economic outlook remains positive within Australia. The country’s GDP grew 1.8% in the March quarter and surprisingly has expanded by 1.1% since the start of the pandemic.
Australia’s real estate pipeline is likely to remain full, despite the wind-down of government stimuli such as HomeBuilder. Building approvals fell in April, in line with expectations, whilst construction activity rose. There has been a 12-month extension of the deadline to start HomeBuilder contracts, giving the building industry an opportunity to spread out its work in a more sustainable manner.
Dwelling approvals
The number of dwellings approved across Australia fell 8.6% in April, following an 18.9% rise in March. Despite this fall in overall dwelling approvals, national private sector detached dwelling approvals have reached a record high, up 4.6% in April. This is evidence of heightened market activity and can be partly attributed to lower borrowing costs. Since the introduction of HomeBuilder in June 2020, detached dwelling approvals have risen 84%. The HomeBuilder approval deadline closed on the April 14 but there is a lag with the commencement of the building approvals as the building approval process typically occurs after the submission of the HomeBuilder application. Therefore, building approvals will still be influenced by HomeBuilder, despite the deadline, in the coming months as people apply for planning permits following approval for the stimulus.
NSW returned the highest number of building approvals, with the number of detached dwellings approved in April increasing by 30.1%. Attached dwellings (apartments and townhouses) were up 12.1%. According to CoreLogic, Sydney has also experienced the largest rise in house prices and the state recorded the largest capital gain over Q2-2021 with values up 9.3%. Daniel Rossi, director of construction statistics at the ABS, stated that the April result emphasised a sustained strong demand for detached housing.
Non-Residential building approvals
The value of non-residential building approved fell 43.2% in April. This can be mainly attributed to a decrease in public sector approvals, following record-high levels seen in March.
Construction work done
Building construction nationally lifted by 2.5% in the March quarter but remained 1.8% lower than for the same period last year. Construction of new detached houses and renovations made up most of this lift, an indicator that people are upgrading their homes with cash that might have been spent on overseas holidays if it weren’t for the pandemic.
The surge in demand has also increased construction costs which were up 0.8% in the March quarter. It is likely future quarters will record a more substantial lift in construction costs as shortages of both materials and labour add some upwards pressure on prices.
