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DEVELOPERS are showing a reluctance to start new apartment projects with latest figures showing the largest quarterly decline in the commencement of construction in 45 years.

Research analyst Cameron Kusher from CoreLogic RP Data said a report released by the Australian Bureau of Statistics reveals significant slowing down in new dwellings.

According to the quarterly Building Activity data the number of new houses starting construction fell by 7.6 per cent to 27,088 — the lowest level since March 2017.

Construction underway in Sydney

Apartment commencement dropped by almost 27 per cent to 19,134 and the fewest over a quarter since September 2013.

Mr Kusher said it is the largest quarterly decline since September 1974 when the number of unit projects dropped by 32 per cent.

Despite the falls both house and unit commencements remain above their long-term average.

“As the housing market has turned and values have started to fall, we can see there is reduced preparedness of developers to commence new projects,” Mr Kusher said.

“We would expect that commencements, particularly for units, are likely to continue to trend lower over the coming quarters as housing values continue to record value falls, finance remains tight and both domestic and foreign investors remain light on the ground.”

Future projects are more likely to be high-rise developments

The latest Building Activity data shows the commencement of units with one to three storeys has remained relatively steady. The demand/supply ratio of medium density dwellings anecdotally is much healthier relative to high density projects.

While there have been significant increases in taller buildings over recent years, commencements is now beginning to ease.

The trend towards high density living has been driven by Australia’s three most populous capital cities — Sydney, Melbourne and Brisbane. Over the past five years, every State and Territory, however, has seen unit commencement reach historic high levels while detached housing construction has also climbed during this period.

Unit commencement has reached historic high levels over the past five years but is now easing

Mr Kusher expects developers will still continue to opt for high-rise projects to recoup acquisition costs and maximise profits.

“With dwelling commencements is expected to continue to fall, the decline doesn’t negate the fact that many developers have paid high prices to acquire sites,” he said.

“As a result, we would expect that despite an expectation of fewer commencements going forward, those projects that do commence will largely be taller apartment projects.”

This article was first published in www.realestate.com.au. Here is the link to the original article.