Building approvals fall as high rise apartment development languishes
The latest figures from the Australian Bureau of Statistics show little headway being made in the Federal Government’s push to create more housing
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Building approvals fell 6.1 percent in August after a rise of 11 percent in July, mostly driven by the apartment sector, new data from the Australian Bureau of Statistics has revealed. Figures released yesterday show the number of total dwellings approved in the last month of winter was 13,991, with the biggest decline in NSW and South Australia, both at -11.5 percent, seasonally adjusted. However, approvals for private dwellings excluding houses — townhouses and apartments — saw a 16.5 percent drop on the same time last year.
The fall has been attributed to the drop in approval for high density apartments blocks more than nine storeys high. Figures show there were 1,214 apartments approved in August 2024 compared with 2,504 in July.
Property Council of Australia Group Executive Policy and Advocacy Matthew Kandelaars said the numbers were disappointing.
“We need to increase the number of homes approved and ensure a strong pipeline of apartment supply, to drive towards our housing targets at scale,” Mr Kandelaars said.
“But the reality is that it has never been more difficult and costly to get apartments out of the ground.”
He said ‘apartment-killer’ taxes and planning systems had had a negative effect on housing supply at a time when the country is struggling to deal with a housing crisis.
“Over the past year, we approved nearly 9,000 fewer apartments and townhouses across the country than in the preceding 12-month period,” he said.
“We need that number to increase month on month to build the homes Australians need.”
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A legacy “partner” lease structure tied to sales, not fixed rent, is drawing investor attention as a potential hedge against inflation.
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A McDonald’s restaurant in Yass has been brought to market with one of the last remaining pure turnover leases in Australia, offering investors a direct share of revenue rather than a traditional fixed rental return.
The asset, located at 1713 Yass Valley Way, is being marketed by JLL via an expressions of interest campaign closing on 30 April. It is underpinned by a legacy lease structure no longer offered by McDonald’s in Australia.
Under the arrangement, the landlord receives 6.5 cents for every dollar spent at the restaurant, creating uncapped income growth linked directly to sales performance.
The lease is structured as triple net, meaning no operational risk, capital expenditure obligations or management responsibilities for the owner.
According to JLL, the property has recorded compounded annual sales growth of 4.26 per cent since 2003, with rental income rising by 150 per cent over the same period.
JLL’s David Mahood said the structure allows investors to “participate directly in the sales growth” of the business, rather than relying on fixed annual rent reviews.
The newly commenced lease runs to 2036, with four additional 10-year options extending to 2076, providing a weighted average lease expiry of 9.92 years by income.
The asset sits on a 3,571 square metre freehold site in Yass, with significant frontage to the Hume Highway, one of Australia’s busiest freight corridors.
The location benefits from high volumes of passing traffic, including an estimated 75,000 vehicles per day.
The quick service restaurant sector has remained resilient through economic cycles, including the pandemic and recent cost-of-living pressures, with McDonald’s continuing to expand its footprint and invest in store upgrades across Australia.
JLL pointed to strong investor demand for McDonald’s-backed assets, with recent transactions typically yielding between the high 2 per cent to mid 3 per cent range.
The Yass listing is expected to attract interest due to the scarcity of turnover-based leases, which provide a natural hedge against inflation by linking income growth to consumer spending rather than predetermined increases.
McDonald’s Yass is available for sale via an Expressions of Interest campaign closing at 3:00pm (AEST) on Thursday, April 30.
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