The housing market has seen a significant surge in the number of high-rise units approved for construction, new ABS data has shown.
The Australian Bureau of Statistics (ABS) this week published building approvals data for July 2016 detailing a record-high number of high-rise approvals in recent years.Throughout the month, the market experienced the second highest monthly number of approvals on record, with 20,987 dwellings approved for construction nationally 11,513 of which were driven by unit approvals.
The July data also represented the second-highest monthly number of unit approvals on record, just shy of the 11,572 approvals in May 2015.Examining the data, market analyst CoreLogic found that the number of units approved for construction on a monthly basis has more recently begun to exceed the number of houses being approved, especially in New South Wales which has experience a significant bounce back in high-rise approvals, while Victoria and Queensland are trending lower.
In July 2016, a record-high 74.4% of approvals nationally were high-rise (defined as four-storeys or higher). Meanwhile, in the 12 months to July 2016, 62.8% of all unit approvals nationally were for high-rise units."If we look back even five years ago, just 50.7% of approvals were for high rise and a decade ago only 35.6% of approvals were for high-rise units," said CoreLogic senior research analyst, Cameron Kusher.
"As high-rise approvals have become the dominant type of unit approval, there have been far fewer semi-detached approvals. This has probably been in response to the cost of development sites and construction costs, which have encouraged developers to build as many units on a site as possible."The analyst said the boom was helping to address a much needed increase in housing supply, though it was expected to be some time before the market can see the results as high-rise development can take a number of years to complete, with the potential to lead to an apartment oversupply.
Numerous banks and analysts have predicted a looming correction in the apartment market that could see sharp falls in Australian property prices.A recent report by analyst firm CLSA has claimed Australia's housing cycle has peaked, with household debt now extending the country's property bubble. CLSA predicted that shift by big banks to tighten lending standards is likely to cause a crisis due to the spread of cheap apartments, leading to a sharp contraction in construction.
Global banking firm Citi also recently announced its forecast around the end to the apartment building boom, with the bank's research team predicting that oversupply, rather than a rise in interest rates, will bring the boom to an end.
"With supply having ramped-up so substantially, it becomes clear why there are concerns of a unit oversupply in certain locations of the major capital cities," said Mr Kusher. "[It's] no wonder APRA has recently confirmed that they are monitoring commercial lending (which includes lending for new housing development) closely for potential risks."
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