Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he's one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written, yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - author of Things That Make You Go Hmmm, one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Wednesday, 3 February 2016

Building approvals trending down (from record highs)

Approvals solid in December

It was another strong month for Building Approvals in December with a seasonally adjusted 18,868 dwelling units approved, a +9.2 per cent rebound from November's abrupt drop, but a -2.5 per decline from the prior year.

Promisingly the rebound was driven by both a +5.4 per cent increase in houses and a +12.8 per cent increase in other dwellings.

Despite this, the trend still remains just about down for a ninth month on the bounce, driven by unit and apartment approvals which have trended down fairly sharply since March of last year.


Although the peak for approvals has now passed in rolling annual terms, 2015 was the biggest ever calendar year for building approvals with some 232,000 dwelling units approved, evenly split between houses and record high approvals for other dwellings.


Notably this cycle has been characterised to an unprecedented extent by "high rise" apartments of four or more storeys, which will be reflected in overt localised oversupply of this property type.


City by city

Monthly house approvals in Greater Perth have all but halved since their peak as the market gets set to absorb some of its excess stock.

Meanwhile Greater Melbourne on the other hand continues to be the runaway leader for detached house approvals, as has been the case continuously over the past last decade-and-a-half. 

It is worth noting that although Sydney has built a relatively high number of apartments over recent years this has partly been at the expense of detached housing construction, reflecting constrictive planning policies and a dearth of shovel ready greenfield land. 


December has often been a feverish month for capital city unit and apartments applications being waved through, and 2015 proved to no exception with a further 8,942 approvals rubber stamped (although this was 9 per cent lower than the prior year equivalent figure).

Unit approvals are still tracking at historically very high levels, but rolling annual totals have begun to tick down in every capital city except for Darwin.

Greater Brisbane saw 1,388 unit and apartment approvals in December, well down following a series of prodigious months since May last year, including four separate months where more than 2,000 units were approved.


The final chart below shows the extent to which the "high rise" phenomenon has permeated the three most populous states.

Although rolling annual approvals may now have have moved beyond their peak, in historical terms high rise approvals remain exceptionally high.

Traditionally this dwelling type was confined to Central Business Districts (CBDs) and locations with relaxed height restrictions on building, such as the Gold Coast.

Through this cycle a number of formerly industrial suburbs in Sydney (such as Mascot and Zetland, for example), Melbourne, and Brisbane (see Fortitude Valley, Newstead, West End, South Brisbane) have seen rezoning lead to a flood of high density approvals. 


Of course, as dicussed on this blog previously, there is no guarantee that all of these building approvals will make it through to become dwelling commencements, and many may end up never being built. 

Dwelling construction is forecast by most analysts to begin its decline in the second half of 2016, and as such will likely join resources construction as a dead weight around the neck of GDP growth.