Dwelling approvals data shows that as unit approvals have surged, housing markets are going vertical with a record-high number of high rise units approved for construction over recent years.

Earlier this week the Australian Bureau of Statistics (ABS) published building approvals data for July 2016. Over the month, there were 20,987 dwellings approved for construction nationally, which was the second highest monthly number of approvals on record.

When looking at the data, the jump in approvals over the month was driven by units, of which there were 11,513 approvals in July. This was the second-highest monthly number of unit approvals on record, just shy of the 11,572 approvals in May 2015. Over recent years, the number of units approved for construction monthly has quite often been larger than the number of houses approved as highlighted in the first chart. Approvals in Vic and Qld are trending lower while in NSW there has been a significant bounce back.

Monthly number of houses and units
approved for construction, National


The second chart details the magnitude of high-rise unit approvals occurring nationally. In fact, in July 2016, a record-high 74.4% of approvals nationally were high-rise (defined as 4 storeys or higher). Unit approvals can be somewhat lumpy, that is why we have used a six month moving average in the chart, nevertheless, it clearly shows the prevalence of high-rise unit approvals nationally over the past five years.

Unit approvals by type, National
(rolling 6 month average)


Over the 12 months to July 2016, 62.8% of all unit approvals nationally were for high-rise units. If we look back even five years ago, just 50.7% of approvals were for high rise and a decade ago only 35.6% of approvals were for high-rise units. As high-rise approvals have become the dominant type of unit approval, there have been far fewer semi-detached approvals. This has probably been in response to the cost of development sites and construction costs which have encouraged developers to build as many units on a site as possible. This will usually mean building up and having approvals for high-rise units.

The third chart highlights the number of high-rise unit approvals (on a 6 month average basis) across the five largest states. What it shows is that the level of high-rise approvals (and ultimately construction) that is currently occurring is unprecedented. It also shows that the surge in high-rise approvals has very much been focussed on NSW, Vic and Qld. In NSW and Vic this acts as a proxy for what is happening in Sydney and Melbourne while in Qld it is a proxy for Brisbane along with the Gold and Sunshine Coasts.

High-rise unit approvals, major states
(rolling 6 month average)



The boom in high-rise construction is providing a much needed increase in housing supply. It is important to remember that high-rise development can take a number of years to complete. This is one of the reasons why recent quarterly data to March shows that there was a record-high 152,449 units under construction. Between March and July, there has been a further 41,548 units approved for construction, many of which would have commenced.

Quarterly number of houses and units
under construction, National


With supply having ramped-up so substantially, it becomes clear why there are concerns of a unit oversupply in certain locations of the major capital cities. No wonder APRA has recently confirmed that they are monitoring commercial lending (which includes lending for new housing development) closely for potential risks.