Housing approvals jump could bring respite to escalating Canberra house prices

Canberra construction approvals rates are on the rise.

The welcomed jump in housing approvals could bring a respite to escalating house prices that dominated the past year. House prices rose 0.74 per cent from the previous quarter to reach a median sale price of $638,000 over the December 2016 quarter.

The latest new home construction data jumped by 26.1 per cent annually to 1188 approved during the first 11 months of 2016. The year prior recorded the second lowest housing approvals on record. The increased supply experienced during 2016 will take some time to filter onto the market and enhance the available new housing stock – a sector that is currently undersupplied.

Mid- to high- rise dwelling construction continues to boom. Townhouse approvals jumped by 30.7 per cent annually to 1234 approved during the first 11 months of the year. Recording the third highest on record. Townhouses appeal to a cross section of buyer – from downsizers to those on an entry-level budget. At a lower entry price point than a detached house it is easy to understand the growth in popularity, particularly as house prices continue to forge ahead. This popularity among buyers means prices are rising, up 0.29 per cent over the quarter to reach a median price of $435,000 during the final quarter of 2016.

Unit and apartment approvals soared by 49.2 per cent annually to 3221 approved from January to the end of November 2016. This is the highest unit approval on record, with the prior peak in 2011. Unit prices have been suffering as a result of the higher stock levels. Prices tumbled by 0.91 per cent from the previous quarter to reach a median price of $381,000 over the December 2016 quarter. Building approvals help to predict the future level of stock that is anticipated to hit the market. Higher approval rates translating into more unit stock will continue to put pressure of price into 2017-18.

The jump in building approvals will take time to filter into higher construction levels. It does indicate that construction remains a strong economic performer in Canberra, driving both the jobs market and investment. The jump in residential approvals is likely to play a crucial role in the local economy throughout this year.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell