ABANDONMENT RATES FOR NEW DWELLINGS


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 2018, cat. no. 8752.0) and monthly publication Building Approvals, Australia (August 2018, 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 downloads tab.


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 45,192 in December 2017 before declining over the past two quarters. The rise is mainly due to an increase in 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.


Graph 1: Number of dwellings approved but not yet commenced, Australia


Dwelling Abandonments Over Time

The number of dwellings abandoned has remained relatively stable over the past decade (see Graph 2), with 5,479 dwellings abandoned in the 2017-18 financial year compared to 4,624 dwellings abandoned in the 2007-08 financial year.

As a proportion of dwellings approved each financial year, the rate of dwellings abandoned has decreased slightly over the past decade (see Graph 3). This is largely due to an increase in the number of dwellings approved over this time, along with a slight decrease in the number of dwellings abandoned. The abandonment rate reached a peak of 3.6% in the 2008-09 financial year due to a decrease in approvals following the global financial crisis.

The abandonment rate increased in the 2016-17 financial year, due to an increase in abandonments of 2,253 dwellings, along with a decrease in approvals of 17,307 dwellings.

Graph 2: Number of dwellings abandoned, Australia

Graph 3: Percentage of approved dwellings abandoned, Australia

Composition of Abandonments

Type of Building Comparisons

Until 2015-16, the number of houses abandoned was higher than the number of other residential dwellings abandoned (see Graph 4). However, as a proportion of dwellings approved, the abandonment rate for other residential dwellings tends to sit higher than that of houses (see Graph 5). This indicates a higher likelihood of abandonment for these types of dwellings, particularly in periods of declining approvals (i.e. following the global financial crisis in 2008-09 and 2009-10).

The rate of houses abandoned has decreased between the 2007-08 and 2017-18 financial year periods, from 3.0% to 1.6%. The rate of other residential dwellings abandoned decreased from 2.6% in 2007-08 to 1.4% in 2015-16, before increasing to to 3.2% in 2017-18.

Graph 4: Number of dwellings abandoned, Type of building, Australia

Graph 5: Percentage of approved dwellings abandoned, Type of building, Australia

State Comparisons

New South Wales had the highest number of dwellings abandoned each financial year since 2007-08 (see Graph 6). Historically, New South Wales also had the highest abandonment rate of the major states, peaking at 7.7% in the 2007-08 financial year (see Graph 7). This has decreased to 2.6% in 2017-18, comparable to the national average of 2.4%.

Graph 6: Number of dwellings abandoned, New South Wales, Victoria and Queensland

Graph 7: Percentage of approved dwellings abandoned, New South Wales, Victoria and Queensland

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. Graph 8 shows that the majority of dwellings are abandoned within five quarters of being approved (2,706 dwellings in 2017-18). The number of dwellings abandoned after being in the pipeline for 6-15 quarters increased in 2017-18 to 1,413 dwellings. Fewer dwellings are abandoned after being in the pipeline for over 15 quarters (455 dwellings in 2017-18). Very few dwellings are abandoned after construction has commenced (906 dwellings in 2017-18).

Graph 9 shows that the majority of dwellings currently in the pipeline have also been approved within the previous five quarters. Despite the large increase in dwellings in the pipeline over the past few years, there has not been a significant increase in projects that have been sitting in the pipeline for long periods of time (over five quarters).

Graph 8: Number of dwellings abandoned, Time in pipeline, Australia	Graph 9: Number of dwellings approved but not yet commenced, Time in pipeline, Australia