Unit construction reaches all-time high

A surge in building construction activity is delivering multiple benefits to Australia’s economy, especially around construction industry employment. New building activity data released by the Australian Bureau of Statistics (ABS) shows that to the March 2016 quarter, a record number of unit projects were underway.

The ABS data shows that 25,122 houses and 29,987 units commenced construction nationally over the quarter. For the second consecutive quarter, house construction eased while unit commencements increased to a new record high.

Looking at dwelling completions, both house and unit completions were lower over the quarter, with unit completions falling for the second successive quarter. Over the March 2016 quarter, there were 23,218 houses and 15,002 units completed. Completions for houses fell across each state and territory over the quarter, while units were lower over the quarter in all states and territories except for NSW and SA.

CoreLogic research analyst Cameron Kusher said, “Although completions have fallen, there is a record-high number of dwellings currently under construction, which is being fuelled by units which, typically, take longer to build than houses.”

While the number of dwellings under construction is at a record high, the ABS data and CoreLogic observations show that an elevated number of houses and units have been approved for construction but not yet commenced. At the end of March 2016, there were 8817 houses and 24,175 units which had been approved for construction but not yet commenced.

Kusher said, “With completed and under-construction supply ramping up sharply over recent years, it is reasonable to expect that fewer recently approved dwellings will actually commence in the short term — particularly when you consider that high-rise unit construction is at record-high levels and the considerable level of risk in constructing such a large project.

“The record-high number of dwellings under construction and the continuing strong pipeline of approvals should ensure that there is plenty of work for the construction industry over the coming years.

“There are, though, concerns of ‘overbuilding’ in some areas, especially considering in certain locations, much of the new unit supply is targeted at investors rather than the owner-occupier market.

“Given the challenges in securing enough presales to trigger the commencement of some projects, over the coming quarters we’re expecting that some projects will not begin construction,” Kusher said.