The massive surge in apartment and townhouse approvals in January reported by the ABS today (chart above) is welcome news for the Queensland building industry and people looking to buy or rent an apartment in inner city Brisbane, where much of the development is likely to occur. At the same time, some developers may be concerned about the number of apartment developments there will be competing for buyers, and the implications for the prices of apartments. I expect the supply boost will severely constrain the growth of apartment prices, but I note that consultancy firm Urbis and other commentators last month were more optimistic, arguing the expected supply boost was catch up growth and prices would continue to increase (see New hotspot for Brisbane apartment development). Pete Faulkner has a nice summary of today’s data in his post Queensland leads a building approvals surge:
The scale of volatility in the seasonally adjusted data can be seen in relief when we consider the Queensland data. Here we see an unbelievable 47.8% increase for the month and a 50.8% jump over the year. These exceptional numbers are all down to unit approvals. In Queensland we saw an extra 1564 unit approvals (up 103.2% m/m!); these approvals alone more than account for all the increase seen nationally over the month. House approvals were up just 63 (+3.3% m/m).
Based on Urbis’s research referred to in the article linked to above, it’s possible that we could see a continuation of high rates of approvals for apartments and townhouses in coming months. This is great news, but I doubt it will do much to offset the large negative shock coming from the downturn in the resources sector that I commented on in a post last week. I expect the Queensland economy will still struggle through 2015 with weak growth in output and employment.