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Today sees the release of the (unadjusted) regional building approvals data which shows the Cassowary Coast as the stand-out performer for the month of August. The ABS unadjusted original data is so wildly volatile that we really need to focus our attention on the Conus Trend series, and in doing so we see quite a dramatic picture emerging.
In the Cairns Regional Council and Douglas Shire areas we are witnessing a clear, and quite sharp, drop in the rate of trend approvals. The unadjusted ABS data shows just 44 approvals across the two Local Govt Areas (down from 68 in July) which results in the Conus Trend dropping to 52 (after July was revised down to 54 from 58) which is its lowest level since March last year. As the chart below shows clearly, we are seeing a sharp slowdown in this area; indeed Trend approvals across the 2 LGAs are now down 17.7% from a year earlier.
Townsville saw 108 approvals in August (after just 83 in July) and as a result the Conus Trend has risen very slightly to 102; however, July was revised down from 101 to 100. Despite this tiny improvement Trend approvals remain 31.1% below their level a year ago. Trend approvals may have bottomed, but they remain at their lowest levels in almost 4 years.
In the Cassowary Coast (where approvals have been as low as 2 in April this year) we saw 13 approvals in August. This sees the Conus Trend increase to 11 (its highest level since May 2012) while the July Trend remained unrevised at 10. As has been the case for some time now, the vast bulk of the approvals are coming in the Tully SA2 area (which includes not only Tully but also Cardwell and Mission Beach) with 11 of this month’s 13 located in this area. So far this financial year the Tully SA2 has accounted for 20 of the 24 LGA’s approvals. The Tully SA2 has already seen 34% of last financial year’s total approvals registered in the first 2 months of the 2015-16 year; The Cassowary Coast LGA stands at 27% of last year’s total. While these increases are coming from a very low base, the chart below makes it abundantly clear that things have certainly shown dramatic improvement over the past year. The Conus Trend approvals are up 46.2% from the same time a year ago.
We are proud to have CBC Staff Selection as supporters of the Conus/CBC Staff Selection Trend Employment and Jobseeker data series
October 8th, 2015 at 4:40 am
Those Townsville building approval numbers still just don’t work for me. On any analysis relative to population and growth it is just not feasible that Townsville should be growing at that rate relatives to Cairns. At the same time the median house price in Townsville has sunk well below the previous peak while Cairns has risen above it. Efficient markets what?
October 8th, 2015 at 5:16 am
I agree with you Mark that they just don’t seem to “make sense”…but the data is there plain and simple. Townsville LGA population was about 12% greater than Cairns (as at 2011 including what is now Douglas) so it certainly seems odd that approvals there, even allowing for the sharp slowdown recently, are still running at almost double the rate they are in CRC and Douglas. I guess this continued supply in TSV will be one of the reasons for the poor performance of house prices there…although we need to bear in mind that approvals do not necessarily equal actual builds!
October 8th, 2015 at 10:26 am
Pete, you are correct, 2 different markets, Cairns is a demand driven market, Townsville is a supply driven market. In Townsville land developers, builders etc work together to keep product flowing onto the market, some of them are building 10 or 20 dwellings in the one street. Defence Housing has also started replacing a lot of its old stock and will build around 1500 dwellings in Townsville over the next 5 years or so, that alone will provide a base of 20 – 30 dwellings a month. Cairns lost all its supply driven base when Hedley, Glenwood etc all went down a few years ago and have never really been replaced. It is very difficult to increase numbers quickly in a demand driven market.
October 8th, 2015 at 10:31 am
Thanks for that Glen. The points you make are very good ones and certainly goes a long way to explaining the apparent paradox in approvals numbers. Many thanks.
October 10th, 2015 at 11:38 am
Thanks Glen. Food for thought and perhaps revisit sometime with regards supply v investor demand. The RTA released September quarter rental bond data this week. Some of the numbers out of Townsville were very weak particularly 3br houses where the median rent fell for the quarter to be $55/week below Cairns. The gap in 4br houses is similar. This has been a significant turnaround since the September 2011 quarter when the equivalent median rents in Cairns were about $40 below Townsville. Units add more complexity to the differences and housing mix between the two cities.
October 11th, 2015 at 9:13 am
Mark, mostly investor with some FIrst home as well. The supply coming onto the market down here is very cheap by historical value, a lot of southern builders up here are also keeping prices down. The price of the new supply impacts directly both rents and valuations with existing older stock having to drop significantly on both counts to compete in the market. The 3br house is the main style as your numbers indicate. They are building 3 Br 2 bath houses 3km from the CBD for $350k which rent for $350 pw which is fairly good value. Vacancy rates are high in the older areas of town and with the old DHA stock coming onto the market I can’t see it turning around any time soon. Thanks