Australian dwelling approvals rise 0.7% in December

Australian dwelling approvals ended 2024 slightly missing estimates with a 0.7% rise in December (vs 1.0% expected); however, this was their 4th rise in the past 6 months. Approvals trended higher over the back half of the year from near cycle lows in the first half as approvals in the higher-density segment accelerated. By contrast, house approvals lost momentum into year-end. Overall, approvals remain at low levels as higher interest rates and capacity pressures continue to weigh on home building activity.

A 0.7% lift in December (to 15.1k) saw headline approvals total 45.9k for the final quarter of 2024, up 4.5% on Q3 and their highest quarterly figure in 2 years. This was also the third consecutive quarterly rise in approvals following gains of 4.8% in Q2 and 5.9% in Q3. Key to that momentum has been the unit or higher-density segment; approvals in the segment rose in December (6%) to be up by 21.1% across the quarter (18.6k). That was after an 11.7% rise in Q3 and a modest 1.5% lift in Q2. House approvals were down for the third month running in December (-2.8%), declining by 4.4% for the quarter. That was a clear weakening from the gains seen in Q2 (6.5%) and Q3 (3.0%). 

   

The underlying detail shows that the lift in higher-density approvals has been driven by the high-rise category. In the latest quarter, high-rise approvals surged by 28.4%, which compares to smaller gains in the low-rise (11.2%) and townhouse categories (2.1%). 

Looking further into the numbers, the acceleration in high-rise approvals looks to be led by the major two capital cities of Sydney and Melbourne, with Brisbane contributing to a lesser extent. 

Alteration approvals were down for the second time in the past 3 months falling 3.7% in December to $1.1bn - still at a very elevated level. For Q4, the value of work approved declined by 1.9%, the first quarterly fall seen since Q1 2023. 

Australian retail sales -0.1% in December; Q4 volumes 1.0%

Australian retail sales declined by 0.1% in December, a much more modest pullback than expected (-0.8%) post the November Black Friday sales as the timing of Cyber Monday sales fell early in the new month. Retail spending lifted by a solid 1.4% across the final quarter of 2024 - a sign that cost-of-living subsidies and the Stage 3 tax cuts are working - driven by the strongest lift in underlying volume demand (1.0%) since Q1 2022. Discounting during the various sales events saw retail price growth ease to 0.4% in Q4, the slowest quarterly increase since the comparable period in 2023. 

December sales declined by a modest 0.1% on the prior month that was boosted by Black Friday sales (0.7%). In recent years (since the pandemic particularly), sales in December have typically seen sizeable declines (2020 -0.9%; 2021 -0.7%; 2022 -0.6%; and 2023 -1.5%) as households have brought forward purchases to November to take advantage of Black Friday discounting. This effect, though still evident, was much more modest in 2024. The ABS noted that Cyber Monday sales occurred in early December, underpinning a 1.6% rise in household goods (including electronics and furniture) that largely offset post-Black Friday declines in other categories. The chart below highlights this contrast in the profile of sales growth in December in 2024 compared with 2023 when all categories declined.  

Despite weakening in December, retail sales still lifted by 1.4% in Q4, their sharpest quarter-to-quarter increase since Q3 2022. Notably, this was demand-driven with retail volumes advancing by 1.0%, the strongest outcome back to Q1 2022. Equally significant, volumes on a per capita basis (adjusted for population growth) picked up by 0.5% in the quarter - the first rise in the series in 9 quarters. Price discounting through Black Friday and Cyber Monday, as well as a material moderation in food inflation (1.2% to 0.4%), saw the retail price deflator ease to 0.4% in Q4. 

The profile of retail volumes shows that discretionary categories led the way - volumes excluding basic food advanced by 1.5%q/q compared to the 1.0% lift in headline volumes. Household goods were the major driver (3.3%) with department stores (0.2%) and clothing and footwear 0%) subdued. Meanwhile, cafes and restaurants posted their strongest rise (1.2%) in more than 2 years. Volumes in basic food were up modestly (0.2%) coming off 3 consecutive quarterly declines.