The growth rate in the number of residential buildings completed in May 2015 shot back into strongly positive growth territory after a sharp dip in March and insignificant growth in April.
From a March year-on-year decline of -20.5%, and a slight rise of +2.7% in April, May’s number of residential units completed rose by a massive 62.3%.
We don’t get too excited about this though, as monthly figures are volatile. Nevertheless, using a 3-month moving average for smoothing purposes, the year-on-year growth rate returned to a mildly positive 7.87% for the 3 months up to and including May. And the strong May growth suggests that residential building completions may have grown positively in the 2nd quarter after all, as we wait for June data.
The strongest May growth in building completions came in the area of “Dwelling Houses smaller than 80 square metres” to the tune of 86.3% year-on-year. However, the houses larger than 80 square metres showed a solid growth of 34%, while a big turnaround came in the “Flats and Townhouses” category to the tune of +61.6%, after prior months of big decline.
The return to positive growth in the completions is more in line with our prior expectations. Residential building completions lag the overall residential cycle, and with existing market stock constraints in many areas of the country in recent years, we would expect 2015 to be a year of positive growth in the number of units completed despite signs of slowing demand growth in the existing home market. In addition, 2014 saw 12.6% growth in residential plans passed, so one would expect this to lead to some growth in units completed with a lag.
We therefore project a +8.5% growth rate in the number of residential units completed for 2015 as a whole, after 2014’s -8.3% decline.
Slowing growth once again in 2016 is anticipated, though, in lagged response to expected further rise in interest rates resuming in the 2nd half of this year, along with slowing demand growth in the existing home market.
Residential building completions for the 3 months to May, however, remained at a mere 46.4% of the level recorded at the end of 2006, a far cry from those boom time highs.