Apartment and townhouse building approvals have halved over the past year across Newcastle and Lake Macquarie.
Australian Bureau of Statistics figures show annual multi-dwelling approvals fell from 1839 in May 2020 to 966 in May 2021 across the city.
In Newcastle local government area, approvals dropped from 1362 to 678.
Data for the first 11 months of the 2020-21 financial year show the dollar value of apartment and townhouse approvals fell from $399 million in the corresponding period a year earlier to $187 million in Newcastle LGA.
Detached house approvals were more buoyant, growing 15 per cent across the Hunter, 6 per cent in Newcastle, 19 per cent in Lake Macquarie, 43 per cent in Cessnock and 48 per cent in Port Stephens.
Maitland, one of the fastest-growing LGAs in NSW, slipped from 973 to 860 detached house approvals.
Detached dwellings accounted for 65 per cent of all residential approvals in the Hunter, up from 57 per cent the year before.
Housing Industry Association Hunter executive director Craig Jennion said buyers wanted more space to work from home and for their children during the COVID-19 pandemic.
"We see the preference during COVID across the country is to move away from capital cities and move into detached houses rather than apartments," he said.
Mr Jennion said the pandemic had reinforced the Hunter as a more affordable "tree change and sea change location" for Sydney people.
The HIA predicts Hunter multi-unit approvals over the next two years to stabilise at pre-boom levels.
"We're back down around our historical numbers. We haven't crashed, but we've fallen from the peak," Mr Jennion said.
"I would say it's concerning the Newcastle market has dropped, but we were expecting that on the back of projects that were under way before COVID struck.
"Developers will be very selective that projects they bring to market have a point of difference or are in a location that is desirable, rather than in a suburb that is away from the golden mile of Newcastle West."
The federal government's HomeBuilder grant scheme helped boost the value of house alterations and additions from $66 million to $120 million in Newcastle in the 11 months to May but had little impact on Lake Macquarie's approval levels.
The value of all approved residential activity dropped $128 million to $429 million in Newcastle but rose $46 million to $442 million in Lake Macquarie.
Across the five Lower Hunter councils, total building approvals were down $430 million to $2.34 billion, though Maitland's new $470 million hospital boosted that tally in 2019-20.
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