Building Approvals — January | By the numbers
- Total dwelling approvals (across the private and public sectors) increased by 2.5% in January to 14,395 on a seasonally-adjusted basis to outpace the market forecast for +1.0%. Last month's initially reported fall of -8.4% was trimmed to -8.1% after revision.
- On a 12-month basis to January, total approvals fell by 28.6% (prior rev: -22.0% from the initial estimate of -22.5%)
- House approvals increased by 1.9% in the month (prior -1.7%m/m) to 9,504 to be down by 7.0% over the year (prior -10.4%)
- Unit approvals were up by 3.8% in January (prior -18.7%) to 4,891, though are -50.9% on a year earlier (prior -37.8%)
Building Approvals — January | The details
The detail in January was the most positive it has been in several months with increases across the 'total', house and unit categories. The last time that happened was in June last year. However, as the chart, above, shows, approvals are in a sharp downtrend with little indication as yet of an easing in the pace of decline.
Approvals to build detached houses lifted by 1.9% in January, which was its strongest outturn since June 2018. However, house approvals in annual terms (-7.0%Y/Y) have now been in decline for 7 consecutive months.
Unit approvals posted a 3.8% rise in the month — their first gain since September — with the available detail indicating that an uptick in low-rise units was able to soften another steep fall from the high-rise segment. Overall, the level of unit approvals has halved (-50.9%Y/Y) from a year earlier; an extraordinary fall considering that annual growth was positive (+2.7%) at the turn of the financial year.
The chart, below, highlights how approvals deteriorated over the second half of last year. While units were the main driver, there was also weakness from houses.
The state detail for January and on a 12-month basis is summarised in the table and chart, below. The annual changes highlight the broad-based nature of the weakness, particularly for units but also for houses. The one exception is Tasmania, where approvals appear to have been on an uptrend over the second half of last year in contrast to the rest of the nation.
Lastly, the value of alteration work approved in January fell by 2.2% to $697.3m (-2.5%Y/Y). Meanwhile, non-residential work approved increased by 6.4% to $3.614bn (+10.3%Y/Y).
Building Approvals — January | Insights
January approvals figures can often display heightened volatility due to seasonality, though in this case, the 2.5% increase looks to be fairly modest and the detail was more positive than in recent months. However, the magnitude of the deterioration over the second half of 2018 remains the prevailing theme for the outlook. In the near term, the level of residential construction activity is supported by an elevated pipeline but with approvals falling away rapidly the indications continue to point to a sharp slowing ahead over 2019 and possibly into 2020. Last week's construction work done data highlighted that activity started to deteriorate in Q3 before accelerating in Q4. Factors likely weighing on the fall in building approvals include tighter financing conditions, declining property prices and an increased supply of stock with more to come online as the pipeline is worked through.
