Australian building approvals fell heavily in November with weakness evident in both units and houses in the month. Over the past year, the approvals on a nation-wide basis have rolled over sharply driven by factors including; tightening financing conditions, property price declines and an easing in the construction pipeline off a highly elevated level.
Building Approvals — November | By the numbers
- Total dwelling approvals (including the private and public sectors) on a seasonally-adjusted basis fell by 9.1% in November to 15,465, which was much worse than the market forecast for a broadly-flat outcome (-0.3%). Approvals from the previous month were revised to show a 1.4% decline compared to the initial estimate at -1.5%.
- On an annual basis, dwelling approvals have decelerated by 32.8% having deteriorated from -13.0%Y/Y last month (revised from -13.4%Y/Y)
- Unit approvals slumped by 18.4% in November to 5,921, which is 53.8% below the level from a year earlier (prior revised: -4.6%m/m, -22.2%Y/Y)
- House approvals fell by 2.3% in the month to 9,543 as the annual pace decelerated to -6.5% from -4.8% (prior revised: +1.1%m/m, -4.8%Y/Y)
Building Approvals — November | The details
From month to month, the building approvals data tend to be highly volatile, though when overlayed against the trend series it is clear to see that the slowdown is being driven mostly by a rollover from the units, however a softening in house approvals also been occurring.
With that established, drawing on the granular detail from today's data, the chart, below, highlights that the slowdown in unit approvals has come mainly from the high-rise category, which are now running around 56,000 over the past year having slowed from a recent peak of around 66,000 over the 12-months to June 2018. In addition, low-rise approvals have also slowed.
For the house category, approvals continue to soften. 'New' house approvals have eased to around 120,000 over the past year after peaking a little above 122,000 mid-year. Townhouse approvals have shown a sharper slide to around 33,800 over the past year, which is well down from the peak above 37,000 during late 2017 to early 2018.
Turning to the state-based detail, the table, below, provides the monthly and annual changes across the states for November for both houses and units.
The chart, below, helps to illustrate the magnitude of the decline in unit approvals in Victoria and New South Wales and to a lesser extent Queensland. Much of this has been focused in the capital cities of those states, particularly in Melbourne where unit approvals have fallen by a staggering 72% over the past year according to the ABS' estimates in today's report and by around 40% in both Sydney and Brisbane.
Also in today's report, the value of non-residential building approvals lifted by 11.1% in November but sit 8.6% lower compared to a year earlier. Meanwhile, the value of alterations approved lifted slightly by 0.4% in the month to be down by 7.2% across the year.
Building Approvals — November | Insights
Today's data was a heavy miss to the downside, though it was impacted by volatility given the large step down in unit approvals. Notwithstanding this, the trend continues to show an ongoing slide in dwelling approvals led by units combined with softness from houses as the impact of macro-prudential policies and property price declines continue to play out. The pipline of work to be completed is still elevated and will underpin activity over the near term, but the slowing coming through in the approvals data points to a weakening in residential construction further out.
