Building approvals jump on apartment developments
There is life left yet in Australia’s residential construction boom, with official figures showing a jump in building approvals.
The Bureau of Statistics data from April show a solid rise in the volatile apartment sector, where a few approvals for large developments can blow out the numbers month-to-month.
The seasonally adjusted number of apartment and other multi-unit approvals rose 8.7 per cent in April, the second month in a row it has increased.
That helped pull the more stable trend estimate 2.3 per cent higher, and it has been positive for five months.
In contrast to the booming apartment sector, private sector house approvals fell 2.3 per cent, seasonally adjusted, and the trend was for modest 0.2 per cent growth.
The number of units and attached dwellings approved in April exceeded the number of detached houses, 10,490 to 9,562, seasonally adjusted.
Westpac’s Matthew Hassan cautioned that this set the data up for a big fall.
“The detail carries a strong warning that this renewed uptrend is unlikely to sustain and may be prone to a sharp reversal in coming months,” he wrote in a note on the figures.
“Specifically, all of the gains over the last two months have been due to a surprise resurgence in high rise approvals, up an estimated 16 per cent in April alone and nearly 40 per cent since February.”
Not only is this segment inherently volatile due to large projects, but it is also under unique pressures at the moment.
“The segment is coming under additional pressure from the tightening in lending conditions for investors domestically and efforts to rein in non-resident purchases,” added Mr Hassan.
Data would normally trigger rate rise forecasts: CommSec
CommSec chief economist Craig James said the data show residential construction is not too far off its peak level.
“Over the past year 235,025 new homes were approved, up from March but still down on the record 239,507 approvals in the year to October 2015,” he wrote in a note on the data.
Combined with very strong next exports, pointing towards the possibility of annual economic growth above 3 per cent in GDP figures out tomorrow, Mr James said this month’s rate cut looks somewhat unnecessary.
“Ordinarily data similar to that released today would cause analysts to tip rate hikes, rather than rate cuts. But at present deflation and disinflation are upper most in policymaker minds – here and abroad.
The value of total building approved surged 18.3 per cent last month after a 4.3 per cent decline the month before.
Residential building dominated, with an 8.4 per cent rise in the value of such approvals last month – the third month in a row where that figure has risen.
The value of non-residential building surged 47.3 per cent in April, but had fallen the four months prior to that.