Canberra development at record highs but so are the non-starts

It takes a short drive around Canberra to recognise building approvals have soared. It is a secret that cannot be hidden. A game often played in our car is ‘spot the crane’. It is a great way to keep a little one occupied.

Canberra experienced record high development approvals during the last fiscal year, with the prior peak recorded in 2010-11, according to ABS data. Many think it is an apartment tsunami. Should we really be negative towards urban densification? The level of construction is not surprising given the strength of population growth and, of course, the need to address housing affordability through the provision of diverse and affordable housing stock.

The 1993-94 fiscal year was a turning point for Canberra’s property landscape and the construction industry. It was the first time unit (all dwellings except houses) approval rates surpassed the number of house approvals. For a number of subsequent years house approval rates did take the lead again, but since the 2009-10 financial year consistently more unit developments have been approved compared with single residential homes.

Recently the surge in construction approvals softened. During the first eight months of 2017 there were just over 700 townhouses approved, plummeting 29.2 per cent compared to the same period in 2016, however figures are vastly elevated compared to 2015. The first eight months of 2017 scored almost 1900 unit approvals, slipping 8.9 per cent annually and a modest decline of 1.8 per cent from 2015. Unit approvals provide the biggest proportion of development starts.

Approval data provides insight into the potential pipeline of stock, however not all approvals will translate into a completed dwelling. There can be delays between the approval and build-start, a completion lag, changes can affect conditions in the specific sub-market or the overall dynamics, which can hinder or even stop a development from proceeding.

The number of dwellings approved whereby construction has not commenced is a statistic reported by the ABS. Last financial year Canberra had a sharp increase to the number of unit developments approved but building works have not yet commenced, signifying a large number of developments could be on hold. This is perhaps the result of an approval that included a far superior number of dwellings, viewed as judicious to build and subsequently release to the market.

Leading market indicators suggest a strong construction pipeline remains, with housing finance and population figures ultimately set to continue to underpin demand.