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House, apartment and townhouse developments recover after COVID-19 dip: ABS

House, apartment and townhouse developments recover after COVID-19 dip: ABS

The number of houses, townhouses and apartments given the green light to be developed sharply rose recently, turning the tide against a downturn exacerbated by the coronavirus pandemic. 

Approved applications to build residential properties jumped by 12 per cent to 13,840 in July, according to seasonally adjusted data released by the Australian Bureau of Statistics, but the combined value of these greenlit developments dropped by about 4 per cent.

"The July results likely reflect improved consumer sentiment in May, on the back of falling COVID-19 cases and easing of restrictions,” Daniel Rossi said, director of construction statistics at the ABS.

Coming off an eight year low

Apartment and townhouse developments fuelled the rise with an increase of almost 23 per cent in July, coming off the back of an eight year low experienced a month earlier. 

Freestanding houses still had their own rally with an almost 9 per cent rise, the strongest monthly increase since January 2015, the ABS said.

Tasmania experienced the greatest percentage surge in development approvals for July with approvals rising 50 per cent over the previous month. It was followed by NSW at 32 per cent, Victoria at 9.3 per cent and Queensland at 7.7 per cent.

Other states experienced a decline in development approvals. South Australia and Western Australia recorded respective drops of 11 and 8 per cent.

Similarly, there was a national divide in the number of applications stamped for freestanding houses. 

Queensland approved almost 16 per cent more in July than the previous month, while NSW approved 14 per cent and Victoria 6 per cent. 

Freestanding house applications fell in Western Australia and South Australia with respective drops of 3 and 2 per cent.

This is not HomeBuilder, but something else: HIA

The largest builders industry association doesn’t believe the rise in housing approvals is related to the government’s HomeBuilder program, a grant designed to stimulate housing development and renovations.

“The HomeBuilder program has been very positive for the detached house sector but the impact of this program is yet to be seen in ABS approval data,” Tim Reardon said, chief economist at the Housing Industry Association. 

“The lift in detached house approvals … more likely reflects building application lodgement and processing returning to normal after the shut-down.”

Development approvals were down almost 3 per cent over the three months to July, he said, falling after significant development concentrated in city areas.

The industry anticipates the government’s HomeBuilder scheme will help it cope with the fall in development demand brought about by the COVID-19 pandemic, where restrictions on international travel has led to weaker development demand.

The $680 million HomeBuilder scheme offers grants of $25,000 to owner-occupiers spending from $150,000 to $750,000 renovating their home, or people building a new home on land worth no more than $750,000.

“The detached market will benefit from HomeBuilder and several other state initiatives which will underpin work on the ground in the December quarter,” Mr Reardon said.

“New Home Sales data suggests that detached house approvals will increase toward the end of the year.”

Another scheme helped new builds rise 

A federal government agency released a research report this week on another scheme that’s making it easier for some people to buy a property and build a new home.

The National Housing Finance and Investment Corporation found the government’s $400 million first home loan deposit scheme helped one in eight people enter the property market four years quicker in the six months it's been available to June 30.

The scheme makes it possible for 10,000 first time buyers to buy a property with a 5 per cent deposit and not need to save for lenders mortgage insurance, an insurance premium paid to banks typically costing thousands of dollars. 

This is because the government guarantees the remainder of the deposit up until 20 per cent.

The report found almost 10 per cent of the people who settled on a property purchased one newly built. 

This included 381 people who bought the land separately and had a contract to build, another 142 who purchased a house and land package, and 105 people who purchased a property off the plan.

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This article was reviewed by Finance Writer Alison Cheung before it was published as part of RateCity's Fact Check process.

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