The Australian Bureau of Statistics (ABS) released its November 2016 building approvals data to the public. The information shows us that there were a total of 17,569 houses and units approved to be built across Australia for that month.

According to the ABS, this represents a seasonally adjusted increase of 7.0 percent over the month of November, due in large part to an increase in unit approvals. However, despite this increase, overall approvals in Australia are down 4.8 percent for the year and are a whopping 18.6 percent lower than the peak October 2015 high of 21,558 houses and units were approved for construction.

Of the 17,569 total approvals, there was 9,503 houses approved for construction and 8,066 units approved for construction. This means that home approvals declined by 0.4 percent for the month of November but unit approvals increased by more than 17 percent over the same time period. For comparison, November’s house approvals were 10.8 percent lower than the April 2015 peak and unit approvals were more than 31 percent lower than the October 2015 peak.

What Does This Data Mean?

When you look at the breakdown of unit approvals and its trend over the past month and year, it’s easy to see that the number of high-rise construction projects has declined. A high-rise is considered to be a unit-type building that is four stories or higher.

What this shows is that there is a persistent concern of high-rise oversupply in large cities within Australia, causing the value for existing high-rise units to decline. This has caused many real estate developers to put high-rise plans on hold and look for other development opportunities.

One of these opportunities lies in the development of townhouses, which constitutes the smallest type of unit building. The middle size is made up of low-rise units of four stories or less. Townhomes have seen a significant increase in unit approvals as developers shift their focus to this undersupplied market.

However, even the rise in townhome unit approvals doesn’t change the fact that the number of overall building approvals has declined over the years. This is interesting to note because non-residential construction has not picked up to fill the gap and some believe that the Australian construction industry might soon face some strong economic headwinds that could slow down the entire sector. This would, of course, trickle up to affect the overall economy in Australia.

How Does This Affect Adelaide?

Adelaide saw the lowest percentage of building approvals for the last six months when compared to Sydney, Brisbane, and Melbourne. This is in line with Adelaide's property market being consistently slow and steady, rarely booms or busts. A low level of building approvals is also a possible sign that there is never an oversupply of residential buildings or construction within the city of Adelaide.

However, experts point out that a slowdown in building approvals late in the year (November 2016) should be expected this late in the construction phase. It’s possible that developers are focusing their sights elsewhere over the normal course of the business cycle and that approvals will pick up in 2017.

It still remains to be seen. What’s interesting to note is that Adelaide’s number of building approvals has remained relatively flat since November 2008 and again consistent with the trend of a safe and steady market. It might have lower returns but this translates to lower risks. When other capital cities are overheating and building supply is high, we are seeing many interstate investors turning to Adelaide as a safe and affordable alternative.

Would you like to learn more about how property trends impact the Adelaide investment? If so, our 'How To Property Invest' blog is full of useful hints.