Australian Building Approvals rebounded in June, posting a sharp increase that well exceeded market expectations.
Building Approvals — June | By the numbers
- Total Dwelling Approvals increased by +6.4% to 19,133 vs market expectations for a smaller rise of +1%. After revisions, approvals in May fell by -2.5% — lower than the initial estimate of -3.2%.
- House Approvals increased by +4.4% to 10,179. Last month’s outsized decline was trimmed to -7.9% from -9.0% after revisions.
- Unit Approvals increased by +8.9%m/m to 8,954. Revisions saw the previous month’s estimate little changed at +4.6% compared to the initial result of +4.7%.
Building Approvals — June | The details
June’s headline increase (+6.4%) comes in the context of declines in both April (-6.0%m/m) and May (-2.5%). That weakness saw total dwelling approvals decline by -5.4% in Q2 to 55,559.
Annual growth has softened to just +1.6%, which compares to the recent peak in December 2017 of +13.2%. However, in total, dwelling approvals in the 2017/18 financial year remained at a strong level coming in at 230,721.
The trend data, which smooths the volatility, confirms that dwelling approvals continue to track at a strong level but have certainly eased from late last year.
Across the states, volatility was elevated with some sharp movements — particularly in QLD (+37.7%m/m) where house approvals lifted +26.5% following a fall of -19.2% in May. This clearly impacted the national result in June; approvals growth excluding QLD was just +0.7%m/m.
State
|
June (m/m)
|
Q2 (q/q)
|
Annual (Y/Y)
|
NSW
|
+3.0%
|
-4.9%
|
-11.2%
|
VIC
|
-9.6%
|
-11.0%
|
+4.1%
|
QLD
|
+37.7%
|
-8.7%
|
+10.1%
|
SA
|
-15.9%
|
+27.4%
|
+19.4%
|
WA
|
+4.8%
|
+9.4%
|
-10.8%
|
TAS
|
+3.3%
|
+6.1%
|
+22.7%
|
Based on ABS 8,731.0
For alterations and additions, the value of approvals fell by -10.1%m/m and by -5.2% in Q2.
Non-residential approvals by value fell by -7.0% in June for a quarterly fall of -11.8%.
Building Approvals — June | Insights
The outlook for residential construction activity is faced with headwinds from property prices which are in decline on a national basis according to CoreLogic’s latest monthly Home Value Index, while auction clearance rates have also slowed dramatically in 2018 to a range of around 50-60% in Sydney and Melbourne. These concerns are heightening when also considering recent tightening that has occurred in lending standards, and this has been linked to a slowing in the ABS Housing Finance data. For now, though, building approvals remain resilient at elevated levels, which points to the risk of a slowing in residential construction activity being delayed.
The outlook for residential construction activity is faced with headwinds from property prices which are in decline on a national basis according to CoreLogic’s latest monthly Home Value Index, while auction clearance rates have also slowed dramatically in 2018 to a range of around 50-60% in Sydney and Melbourne. These concerns are heightening when also considering recent tightening that has occurred in lending standards, and this has been linked to a slowing in the ABS Housing Finance data. For now, though, building approvals remain resilient at elevated levels, which points to the risk of a slowing in residential construction activity being delayed.
