According to the latest ABS data on building activity, the value of residential-related construction work completed for the September 2016 quarter recorded $6.52 billion in total for the state of Victoria, representing a quarterly decline of 6.5 per cent but a growth of 5.7 per cent on the same quarter last year. This included $2.41 billion for houses, $2.13 billion for units and apartments and $1.98 billion for renovations, as shown in the chart below.

Both houses and units and apartments work came down from the high level of completions recorded for the June quarter. Total value of houses completed declined by 14.6 per cent over the previous quarter, whereas the value of new units and apartments dipped by around 4.9 per cent during the same period. Nevertheless, both sectors remained at a high level. Meanwhile, the value of renovation work continued to rise steadily, having grown by 3.6 per cent over the September quarter.

Quarterly Value of Housing Work Completed
Total Victoria, in 2013/14 Dollar Value, Ending September 2016 Chart 1

Whilst the new houses approvals continued to grow in the September quarter, new house completions experienced a sharp drop-off the June quarter peak, reflecting the highly volatile and cyclical nature of the sector (Chart 2). Less than 8,000 houses were delivered in the September quarter, down by 24.2 per cent on the previous quarter and 6.8 per cent on a year-on-year basis.

Meanwhile, new houses commencements also took a negative turn during the same period. A total of almost 9,300 new houses broke ground in the September quarter, down from more than 10,400 in the June quarter, representing a quarterly decline of 10.9 per cent, although having grown by around 6.4 per cent compared to the September 2015 quarter.

Quarterly New Houses Approvals, Starts & Completions
Total Victoria, Ending September 2016 Chart 2

Similarly, completions of new apartments and units also declined during the September quarter, following the strong recovery experienced in the June quarter. Total apartments and units completed in the September 2016 quarter recorded almost 6,600 dwellings, down slightly by around 1.4 per cent on a quarterly basis.

The apartments and units commencements continued to drop in the September 2016 quarter, having declined by around 8 per cent over the June quarter and by 30 per cent year-on-year.

Quarterly New Apartments & Units Approvals, Starts & Completions
Total Victoria, Ending September 2016 Chart 3

The downturn in completions and commencements for both houses and apartments can be partly explained by the high level of housing pipeline, including newly approved dwellings, dwellings approved but yet to start and those under construction, in particular that of apartments and units which is at a historically high level, as Chart 5 below indicates. A near record-high level of units under construction and a record-high pipeline of units approved but not commenced suggests that developer’s confidence to commence new apartment projects has probably dipped. Such high level of pipeline may also explain the falls in new apartment approvals in October and November 2016. Nonetheless, the substantial pipeline of stock under construction for both houses and apartments means that completions will likely bounce back in the coming quarters, although commencements are more likely to remain subdued.

Quarterly Pipeline – Houses
Total Victoria, Ending September 2016 Chart 4

Quarterly Pipeline – Apartments & Units

Total Victoria, Ending September 2016 Chart 5

Non-residential activities also slowed down. As the chart below shows, the value of non-residential work done for the September 2016 quarter in Victoria recorded $2.27 billion measured in constant 2013/14 dollar value terms, having dipped marginally from close to $2.28 billion for the previous quarter, significantly down from $2.65 billion in the September 2015 quarter.

Quarterly Value of Non-Residential Work Completed
Total Victoria, in 2013/14 Dollar Value, Ending September 2016 Chart 6