Building Approvals — February | By the numbers
- Total dwelling approvals (including the private and public sectors) increased by 19.1% in February to 17,074 (seasonally adjusted) compared to a 1.8% decline forecast by markets. January's initially reported increase of 2.5% was lowered on revision to 2.3%.
- Through the year, total dwelling approvals have fallen by 12.5% (prior rev: -28.9%)
- Unit approvals skyrocketed by 62.4% (prior rev: +3.3%) in February to 8,035 to cut the annual fall from 50.5% to 10.6%.
- Approvals for houses fell by 3.7% (prior rev: +3.3%) to 9,038 in the month for an annual decline of 14.2% (prior rev: -7.7%)
- The smoothed trend series showed; total approvals lifted by 0.4% to 15,203 in February, with an annual decline of 21.7%. Unit approvals posted a 2.5% monthly rise to 6,038 (-32.7%Y/Y) with houses falling by 0.9%m/m to 9,166 (-12.3%Y/Y).
Building Approvals — February | The details
Clearly, this was a very volatile report impacted by approvals in the unit category. Unit approvals are usually volatile as a rule, due to the lumpy nature of high-density projects in particular, with that effect amplified in these data. The underlying detail suggested that high-rise approvals accelerated in February across both Sydney and Melbourne. Stepping away from the monthly figures, unit approvals on a trend basis remain sharply lower on a year earlier having fallen by almost 33%. At best, though, there are tentative signs that unit approvals are beginning to stabilise at around pre-boom (pre-2015) levels.
For house approvals, February's data was broadly consistent with the ongoing slowing from the past several months. As Q4's National Accounts showed, residential construction activity deteriorated sharply over the second half of 2018 with the approvals data continuing to suggest this will persist in 2019. Notably, the weakness in house approvals has been broad-based across the nation over the past year, as shown in the table (below).
The full state-level detail is also shown in this table, again noting the heightened volatility in the monthly changes.
In February, the value of alteration work to residential properties lifted by 4.4% to $733.2m around a gradual uptrend over the past few months. The value of non-residential work approved in the month increased by 2.1% to $3.7bn, which also appears to be on a gently rising trend.
Building Approvals — February | Insights
Given the volatility, the seasonally adjusted results can be largely discounted. The trend series lifted modestly in February (+0.4%) but only after a larger decline in January (-0.8%), while approvals remain sharply down through the year (-21.7%). Approvals for houses continue to soften, though there are early signs that unit approvals may be beginning to stabilise. Residential construction activity can be expected to remain a headwind to the domestic economy through 2019.