Official figures for September show a lift in new dwelling approvals, led by apartments, units and townhouses. Approvals still sit well below the levels of a decade ago, so the rise does not close the gap on its own. For investors, the more useful question is how many approved projects actually reach completion.
What happened
Hotspotting reports that Australian Bureau of Statistics figures show dwelling approvals rose 5.1% in September, after a fall in August. A total of 17,948 dwellings were approved during the month. The increase came mainly from multi-dwelling projects, which rose 16.6% over the month to 6,579 approved. New South Wales recorded the largest rise in apartment approvals, with 1,995, and townhouse approvals rose 8.3% to 2,792.
Real Estate Industry Association of Australia president Jacob Caine describes the country as being in a "structural housing deficit". He links that to fewer choices for people looking for a home, higher prices and a greater chance of insecure housing or homelessness. Urban Taskforce Australia chief executive Tom Forrest takes a more cautious view. He accepts that rising approvals are a positive sign, but he argues that approvals alone do not guarantee that new homes will be delivered, because a project only goes ahead if it stacks up financially.
What it means for property investors
A planning approval is permission to build, not a finished home. Forrest's point is that the approval number tells you about the pipeline, while the economics of each project decide whether it is built. Build costs, financing and a developer's own feasibility assessment all sit behind the headline figure. For someone considering a new property, approvals data describes what may reach the market later, not what will be available at settlement.
The multi-dwelling result also deserves care. The story reports a strong rise in apartment, unit and townhouse approvals for September, but it also notes that approvals fell in August. One month can swing sharply in either direction, so the trend across several releases tells a fuller story than any single result. A rise after a fall is a useful data point, but it is not yet a pattern.
The story does not report rents, vacancy rates or prices, so it cannot tell an investor how any particular area will perform. Rental income depends on local demand, the type of dwelling and how much new stock actually completes nearby. A national approvals figure cannot answer those questions for a specific street or suburb. An independent rental appraisal for a specific property is a more reliable input for that decision than a headline statistic.
It is also worth separating the state picture from the national one. A large rise in one state's apartment approvals may mean very little for a market where the new supply is limited or where build costs make projects hard to start. Investors who look at approvals data are usually better served by asking where the projects are, what type they are, and whether they are likely to complete within the period they plan to hold a property.
What to look at next
- Approvals versus completions. The ABS publishes building activity data that covers approvals, construction starts and completions. Comparing these series over time shows how much of the approved pipeline becomes finished dwellings.
- The trend, not the month. Look at several releases in a row before drawing a conclusion about direction. A single strong month after a weak one is easy to over-read.
- The local pipeline. In the area you are considering, check where approvals are concentrated, whether those projects appear to be moving ahead, and how many new dwellings are due to complete nearby. Local council records and the developer's own progress updates are useful starting points.
These are questions to work through with a licensed financial adviser if you are weighing up a purchase. A buyers agent or local property adviser who knows the area can help with the local pipeline, and an independent quantity surveyor can help with build cost questions. A licensed conveyancer or solicitor should review any contract. If you would like to talk through how this fits your own situation, you can book a free call. You can also read more of our commentary on the Insights page.
General information only, not personal financial advice. Speak with a licensed adviser before acting.