30 July 2009
Todays Australian Bureau of Statistics approval figures illustrate the impact of tough business credit conditions on apartment development, according to the Urban Taskforce.
Across Australia, the trend estimate for private sector house approvals rose 2.5 per cent in June and has risen for six months. However the trend estimate for private sector higher density home approvals fell 4.6 per cent in June and has now fallen for 12 months.
In June 2009 only 422 apartments and townhouses were approved for construction in NSW, compared with the average June figure of 1,400 approvals in the ten years to 2008. The Urban Taskforces chief executive, Aaron Gadiel, said the difficulty in financing apartment construction will be particularly tough on Sydney.
Sydney has been far more dependent on apartment and townhouse construction than any other Australian city, Mr Gadiel said.
Apartment and townhouse construction has accounted for 85 per cent of new housing development.
ABS figures released earlier this month revealed that NSWs share of national apartment and townhouse construction has plunged to 26 per cent from 33 per cent last year.
Mr Gadiel said the rate of new home construction, including free-standing houses, was not strong enough to keep a lid on rising rents.
No matter which way you cut it, the level of NSW housing development is not up to scratch, he said.
Just 1,930 new homes were approved in NSW in June – the worst ever June figure since the ABS began collecting this data in 1983.
In the same month, with their smaller population bases, Victoria approved 4,200 new homes and Queensland approved 2,400 homes.
NSW accounts for 33 per cent of Australias population, but only 19 per cent of new home construction.
Mr Gadiel said that the only good news was the fact that total new home approvals have now trended positively in NSW for three months with a 1.9 per cent increase.
However this followed a negative trend for 15 straight months with a 37 per cent decline.
In seasonally adjusted terms, NSW monthly home approvals rose by 3.4 per cent, although this figure is highly volatile and should be treated with caution.
With this shortfall in new housing, we can see why Sydney rents are increasing by 11 per cent a year, against an inflation rate of 2.5 per cent.
The latest figures also reveal the performance of NSW for the full 2008-2009 financial year.
The last financial year saw a record low number of NSW home approvals issued Mr Gadiel said.
23,000 homes were approved for construction in NSW in the last financial year, compared with 31,000 in 2007-2008. Until this year, the ten year average for NSW home approvals was 43,000 homes a year.
The pain hasnt just been confined to home development, Mr Gadiel said.
The value of approved commercial building construction plunged 43 per cent from $4.6 billion in 2007-2008 to $2.6 billion in the last financial year.
There was sharp 56 per cent drop in the value of approved office development from $2.2 billion to $949 million. And a 21 per cent fall in the value of retail and wholesale trade building approvals – $2 billion to $1.6 billion.
For every $1 million in construction expenditure, 27 jobs are created throughout the broader economy.
Mr Gadiel said that, despite financing difficulties, some property developers were still willing and able to proceed with their projects.
When developers are able to proceed, the community should be lining up to support them.
Public officials in every level of government need to understand how important it is to re-start development in NSW.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
The construction activity made possible by property developers contributes $69 billion to the national economy each year and creates 709,000 direct jobs. The construction industry is Australias third largest source of employment.
Note: Illustrative graphs are included in the pdf below.
