Property market breaks new ground

Property market breaks new ground

Written by Mark Thomas

21 January, 2020

Property market breaks new ground

Building approvals by value and number of units are now in positive territory for NSW and heading towards positive territory for the nation.

This is further evidence that supports this property cycle is shifting towards sustainable growth, not just a technical rebound following the post election hype and interest rate reductions in 2019.

The number of dwellings approved in Australia increased by 11.8 percent month-over-month in November 2019, smashing market expectations of a 2 percent gain. The strong rebound was supported by an upturn in approvals for both private sector dwellings excluding houses (22.6 percent) and private sector houses (6.1 percent).

When we look at the data as a rolling annual percentage change there is a clear trend emerging, particularly for NSW dwellings where the annual change is in positive territory for the first time since 2016, up 7 percent.


Number of Dwelling Units Approved – Annual Change

Property market breaks new ground


If we look at the value of building jobs, a similar picture is developing with NSW in positive territory rising 1 percent over the last twelve months. Clearly these numbers are well below the boom days of $8 billion per month nationally, with the latest months value around $5.5 billion nationally, and $1.8 billion in NSW versus the peak value of $2.7 billion.

So far in this cycle the key developments have been:

  • Improved confidence and sentiment post the election as a number of mooted taxes did not change (negative gearing, capital gains, carbon tax and dividend imputation).
  • Announcement and launch of First Home Loan Deposit Scheme bringing FHB enthusiasm and confidence back.
  • Three interest rate cuts from the RBA in 2019 providing relief for the heavily indebted Australian public. One of the benefits of this high level of debt is that the public are highly sensitive to interest rate moves.
  • An easing in the stance on responsible lending from the loans market. The Federal court action by ASIC against Westpac ruled against ASIC.  It is currently in appeal but did highlight how Westpac had not breached the responsible lending provisions of the Credit Act, as Perram J decided that a lender ‘may do what it wants in the assessment process’.
  • Building approvals in November pushed into positive territory for the first time in a while in NSW and are trending that way nationally.
  • Auction clearance rates in Sydney shift towards 70-80 percent from September 2019 based initially on low volumes of stock in the market as old stock clears and sellers look to enter the market as prices rise.
  • According to CoreLogic, days on market have dropped from 41 to 34 for capital cities over the last year, and in Sydney the numbers have shifted from 47 to 30 days.
  • Quarterly price increase for the December quarter (4%) was the largest since 2009 according to CoreLogic.

The property market has climbed a wall of worry with many commentators missing the turnaround completely post the election in 2019.  Their arguments have focused on a weak jobs market being a large handbrake for ongoing growth prospects of any stature.

The opposing factors to the weak labour market are the continued strong growth in population driven by immigration that is twice the OECD average, and government support by way of the First Home Buyer Deposit Scheme.  Top down stimulus from lower interest rates is not just an Australian phenomena (see previous article) and should create above trend global economic growth in 2020.  Australia will significantly benefit from stronger economic growth as will the Australian property market.


Value of Building Jobs New and Alterations  – Annual Change

Property market breaks new ground


The Australian Bureau of Statics reported late last week (November data key points):

Total dwelling units

  • The trend estimate for total dwellings approved rose 0.8% in November.
  • The seasonally adjusted estimate for total dwellings approved rose 11.8% in November.

Private sector houses

  • The trend estimate for private sector houses approved fell 0.3% in November.
  • The seasonally adjusted estimate for private sector houses rose 6.1% in November.

Private sector dwellings excluding houses

  • The trend estimate for private sector dwellings excluding houses rose 2.9% in November.
  • The seasonally adjusted estimate for private sector dwellings excluding houses rose 22.6% in November.

The scope of the collection comprises the following: 

  • construction of new buildings;
  • alterations and additions to existing buildings;
  • approved non-structural renovation and refurbishment work; and
  • approved installation of integral building fixtures.



 Please consult your advisor for specific recommendations.  This general advice does not take into account the client’s objectives, financial situation or needs as we do not and cannot provide personal advice.  Any views written about in this article are the views of the author who has no holdings in those companies or investments mentioned in this article.