Abandonment rates for new dwellings

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Released
9/10/2019
Source
Building Activity, Australia, June 2019

Introduction

This article examines long term trends in abandonment rates of new residential dwelling approvals to inform future building activity figures. The composition of abandoned dwellings by type of building, location and length of time in the pipeline are presented.

Data are presented for the following types of dwellings:

  • 'Houses' - defined as detached buildings used for long term residential purposes, consisting of only one dwelling unit and are not a result of alterations or additions to a pre-existing building.
  • 'Other Residential' - include both semi-detached row or terrace houses (attached in some structural way to one or more dwellings, with their own private grounds and no separate dwelling above or below) and flats, units or apartments (blocks of dwellings that don't have their own private grounds and usually share a common entrance, foyer or stairwell).
  • 'Total residential' - the combination of both 'Houses' and 'Other Residential'.


For further information refer to Functional Classification of Buildings, 1999 (Revision 2011)  (cat. no. 1268.0.55.001).

Once a new dwelling has been approved (a building approval is defined as the final certification required before building activity can legally commence), it may be considered abandoned before or after construction has commenced, where:

  • The owner of the building job reports that the approved work is not going to commence or continue, and the building job has not been sold to another entity; or
  • No construction has commenced within the required period and the approval has expired.


The data presented are from the Australian Bureau of Statistics (ABS) quarterly publication Building Activity, Australia (June 2019, cat. no. 8752.0) and monthly publication Building Approvals, Australia (August 2019, cat. no. 8731.0). Monthly building approvals data has been lagged by one month to align with the lag between building approval and subsequent selection in the Building Activity survey. Data presented in this article are available in the 'Building Activity: Abandonment rates for new dwellings' data cube on the data downloads section.

The abandonment rates for new dwellings data cube is released annually with the June quarter edition of Building Activity.

Refer to the data downloads section in the latest June quarter publication of Building Activity, Australia.

Results

The number of new residential dwellings in the pipeline (i.e. approved but not yet commenced) has surged to unprecedented levels over the last few years (see Graph 1), peaking at 45,668 in December 2017 before beginning to decline over the past six quarters. This has been driven by other residential dwelling approvals, particularly for new apartments in New South Wales, Victoria and Queensland (see Building Approvals, Australia 8731.0). There has also been a recent increase in the average time between approval and commencement for these projects (see Average Dwelling Commencement Times). This could indicate an increased risk that these projects will not proceed to commencement (i.e. are abandoned), therefore not contributing to future building activity.

Dwelling abandonments over time

Whilst the number of approved dwellings abandoned has increased slightly over the past decade (see Graph 2), with 5,280 dwellings abandoned in the 2018-19 financial year compared to 4,636 in the 2008-09 financial year, the abandonment rate as a proportion of approved dwellings has decreased (see Graph 3). 

The abandonment rate reached a peak of 3.4% in the 2008-09 financial year due to a decrease in approvals following the global financial crisis. As the economy recovered from the global financial crisis, dwelling approvals increased to a peak of 236,867 dwellings in 2015-16, and the abandonment rate subsequently fell to a low of 1.2%. 

There has been an increase in the abandonment rate in the most recent financial year, from 2.0% in 2017-18 to 2.8% in 2018-19. This was largely driven by a decrease in dwellings approved of 38,349 dwellings, along with a slight increase in the number of dwellings abandoned of 536 dwellings. 
 

Composition of abandonments

Type of building comparisons

Until 2016-17, the number of houses abandoned tended to be higher than the number of other residential dwellings abandoned. Changing economic conditions and concerns of oversupply and building quality may have contributed to the sharp increase in abandonments of other residential dwellings in 2016-17. 

The abandonment rate of other residential dwellings as a proportion of dwellings approved tends to sit higher than that of houses (see Graph 5). The rate of houses abandoned has decreased from 3.0% in 2008-09, to 2.2% in 2018-19. Other residential dwellings were abandoned at a peak of 4.6% in 2009-10, decreasing to a low of 1.1% in 2015-16 in line with strong increases in approvals up to a peak of 116,695 dwellings in 2015-16. The abandonment rate of other residential dwellings has increased to 3.5% in 2018-19, driven by a 27.7% fall in approvals of 30,332 dwellings this financial year.

State comparisons

New South Wales continues to have the highest number and rate of dwellings abandoned out of the three Eastern states in the past decade (see Graph 6). The abandonment rate peaked at 6.8% in the 2008-09 financial year (see Graph 7), decreasing to 1.3% in 2015-16 before increasing to 4.1% in 2018-19.

Time in pipeline

'Time in pipeline' is the length of time between approval and commencement or abandonment, or the time since approval for not yet commenced dwellings. The majority of dwellings that are abandoned, usually do so within five quarters of their approval (see Graph 8). Very few dwellings are abandoned after construction has commenced (761 dwellings in 2018-19). 

The majority of dwellings currently in the pipeline have been approved within the previous five quarters (see Graph 9). Despite the pipeline of approved dwellings increasing over the past few years, there has only been a gradual increase in approved projects that have been waiting for more than five quarters to commence (see Graph 9).