Australian dwelling approvals were broadly flat in February (-0.3%) against expectations for a larger decline (-1.5%) following gains through December (1.5%) and January (6.9%). Approvals have trended higher over recent months, underpinned by the higher-density segment as high rise approvals have lifted in Sydney and Melbourne. Higher interest rates have weighed on home building activity over the past couple of years; and while the RBA has started easing policy, this will take time to flow through to the sector.
February dwelling approvals (16.6k) were broadly unchanged from the prior month, at levels up more than 25% on 12 months ago. Approvals lifted by 8.5% across December and January, and with those gains, the 3-month average to February lifted to 16.3k - a high back to October 2022. However, seasonal effects potentially overstate the underlying strength and, as seen in today's result, some softer prints could now follow.
Detached approvals were near-steady in February (0.2%) at 9.3k on a seasonally adjusted basis. This segment has seen a moderate rise over the past 12 months of 5.2% and the level remains low relative to the series history - particularly when considering the strong rate of population growth over the past decade. Notably in New South Wales and Victoria, house approvals have settled at levels below their ranges that prevailed in the years before the pandemic.
Higher-density approvals saw a 0.9% decline in February, easing to 7.3k. This segment has driven much of the recent uptrend in approvals; higher-density approvals are up 67.5% across the past 12 months from levels near cycle lows. The major driver of this strength looks to have been in the high-rise category, mainly in Melbourne and Sydney.
The value of residential alteration approvals (for house renovations) was 0.3% softer in February, with the level remaining elevated at just below $1.2bn. Meanwhile, non-residential approvals (-16.5%m/m) are showing signs of seasonal volatility - these approvals rose by 39% over November-December but have since fallen by 35% through January-February.
