New data from the Cordell Construction Market Movement Report, Q4 2016 reveals that 182 apartment projects were deferred in the December quarter of 2016, just 1 per cent more than in the same period the year before.
However, the value of these projects rose by a fifth, bringing the value of deferred apartment projects to $1.6 billion in the final quarter of the year (up from $1.3 billion in Q4 2015).
On a state-by-state basis, Queensland saw the highest number of deferrals at 64 projects, and the value of combined deferrals was 26 per cent higher than in Q4 2015, at $663 million. This included a $100 million mixed use development in Gold Coast City, which is currently for sale with development approval.
New South Wales and the Australian Capital Territory had the highest value of apartment project deferrals, making up nearly half (47 per cent) of the value of deferrals nationwide.
In fact, number of deferrals across NSW and the ACT has trended rapidly upwards since March 2015, potentially due to concerns over an apartment ‘oversupply’ in these regions.
Abandoned projects drop by half
Despite the value of deferred projects rising, the report also shows that 95 apartment and unit projects, valued at a total of $549 million, were abandoned in the final quarter of 2016, down by around 50 per cent (from $1.03 billion) on the same period the year before.
The report reads: “Relative to Q4 2015, this year saw a significant decrease in the number of apartments and unit projects being abandoned nationally, leading to a decrease in their combined value...
“This was largely driven by a reduction in the number of abandonments across Queensland and Victoria, where the number of abandoned unit projects fell 77 per cent and 65 per cent respectively.
“NSW and the ACT did not reflect the national trend. The reported number of abandoned apartment and unit projects was steady, while the value of combined projects increased 40 per cent. The value of combined projects abandoned [in these regions] at Q4 2016 was $361 million.”
Notably, the report highlights that 90 per cent of the increase in value of abandonments in NSW/ACT can be attributed to one mixed used development in North Sydney, worth $90 million.
Apartment construction drops but more are in the pipeline
Overall, there were 1,927 new apartment and unit projects entering the pipeline in Q4 2016, representing a 24 per cent increase on the year before. However, the value of these projects fell by 4 per cent to $12.35 billion.
The highest value proposal across NSW and ACT was a $298 million mixed-use development, which includes the construction of approximately 500 apartments in Zetland, NSW.
Unlike the pipeline projects, the apartment and unit projects captured in the construction stage at Q4 2016 was lower than the same quarter in 2015. The number of reported apartments and units moving into construction nationally was 455 projects with a total value of $2.87 billion, down from 855 projects valued at $4.33 billion.
The largest decline in the number and value of apartment construction was in Tasmania, where Q4 2016 exhibited just 10 projects under construction with a combined worth of $10 million.
However, the report states that, overall, Q4 2016 was still strong for apartment and unit construction, with the quarterly result being above an average of 386 projects for the last eight quarters.
[Related: Dwelling approvals plunge in October]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.