What data informed these insights
The Australian Bureau of Statistics (ABS) regularly release data on building approvals. The data reveal that the drop in home building forecasted by many commentators has not occurred. The demand for housing is very strong in some markets.
The number of residential building approvals is high
Data on residential building approvals published by the Australian Bureau of Statistics are a reliable leading indicator of new housing supply.
In the 12 months to March this year there were about 63,500 residential building approvals in Victoria. This compares to fewer than 59,000 in the previous 12-month period.
Building approvals are derived by the ABS from data collected by the Victorian Building Authority on permits issued by building surveyors at the time of construction. They are not the same as planning permits.
Most of the increase in residential building approvals was due to an increase in the approval of detached houses. There was also a small increase in the number of two storey townhouses. All other dwelling types saw a decline in the number of approvals.
The number of building approvals of detached houses was around 35,500 in the year to March 2020. It increased to around 43,500 in the year to March 2021. This was a record for a twelve-month period.
Figure 1: Quarterly residential building approvals by dwelling type, Victoria. Source: Building Approvals, ABS
Much of the increase in the number of approvals of detached houses were in Melbourne’s seven growth area municipalities. These are Cardinia, Casey, Hume, Melton, Mitchell, Whittlesea and Wyndham. These areas accounted for almost 22,500 of the approvals of detached houses. The rest of the increase was in regional cities such as Geelong, Bendigo and Ballarat and in peri urban municipalities such as Bass Coast and Baw Baw.
Figure 2: Quarterly residential building approvals of detached houses by region, Victoria. (See Figure 6 for LGA grouping). Source: Building Approvals, ABS
Medium and high density apartments
In contrast to detached houses, approvals of medium and high-density housing fell. They have continued their steady decline since peaking in 2017-2018. There were fewer than 9,500 medium and high-density apartments approved in the 12 months to March 2021. This compares to more than 13,000 in the previous twelve months. The number of approvals of apartments in medium rise developments (3-8 storeys) in Melbourne’s middle ring suburbs have been low since the end of 2018.
Figure 3: Quarterly residential building approvals of apartments in buildings of 3-8 storeys, by Metropolitan Melbourne region (See Figure 6 for LGA grouping). Source: Building Approvals, ABS
Approvals in Regional Victoria are at record highs. There were about 16,500 approvals in the 12 months to March. This was a 34 per cent increase on the previous 12 months. It also well more than the average of about 12,000 per annum seen over the last five years. Increases were seen both in Regional Cities and other parts of regional Victoria.
Figure 4: Quarterly residential building approvals, three largest regional cities (Bendigo, Ballarat and Geelong) and Other Regional, Victoria. Source: Building Approvals, ABS
Regional cities saw an increase of nearly 40 per cent in approvals to around 7,300 in the twelve months to March 2021. Much of the increase was accounted for by major regional cities. Ballarat, which saw a 60 per cent increase, Bendigo a 32 per cent increase and Geelong a 33 per cent increase. Other cities saw smaller but proportionally larger increases. The number of approvals almost doubled in Wodonga to over 500, and approvals in Warrnambool increased by 75 per cent to over 300.
Figure 5: Quarterly residential building approvals: Ballarat, Bendigo and Geelong. Source: Building Approvals, ABS
Long term trend by Local Government Area
The established areas of Melbourne have seen a continuation of long term declines in residential development. Melbourne's growth area LGAs (nearly 25000 dwellings in the last 12 months) and regional cities (over 7000 dwellings in the last 12 months) have seen record levels of housing demand.
Figure 6: Rolling 4 quarter (yearly) total residential building approvals. Source: Building Approvals, ABS Select a region to see all its LGAs and double click legend item to show that LGA only.