Australian dwelling approvals accelerate in November

Australian dwelling approvals accelerated by 11.8% in November to post their strongest gain in 9 months. This result was led by a surge in the high-rise segment in Sydney, while national house approvals recorded their fastest month-to-month rise in nearly 4 years.  

Building Approvals — November | By the numbers

• Dwelling approvals (including the private and public sectors) on a seasonally adjusted basis increased by 11.8% in November to 14,675 where the market consensus has been for a 2.0% rise. This followed a fall of 7.9% in October (revised from -8.1%). 
• In annual terms, the decline in dwelling approvals was cut to -3.8% from -22.9% a month earlier to be contracting at its slowest pace in 17 months.  
• House approvals more than overturned a weak result in the month prior (-5.8%) with a 6.2% rise in November to 8,561; its strongest monthly gain since December 2015, while the annual decline slowed from -18.0% to a 10-month low at -9.7%. 

• Unit approvals were coming off an 11.1% fall in October but lifted by their most in 9 months with a 20.8% surge in November to 6,114. As a result, in annual terms, unit approvals swung from -29.5% to +6.0% to move into positive territory for the first time since June 2018. 

Building Approvals — November | The details 

November's 11.8% rise in dwelling approvals equated to an overall increase of 1,550 to 14,675. Unit approvals provided the bulk of the increase (1,054), while house approvals lifted more modestly (497). The underlying detail indicated the strength in unit approvals was concentrated in the high-rise segment, though there was also moderate support from the low-rise segment.

      

The state-based outcomes (shown below) were highlighted by the surge in approvals from New South Wales in November, most notably from units. In the capital city of Sydney, the ABS estimated unit approvals lifted to their highest level since mid-2018. Through the year, approvals in New South Wales lifted by 7.1% to be tracking at their fastest pace in 18 months. Elsewhere, strength in house approvals in Victoria and Queensland was notable, while approvals in South Australia continued their recent uptrend from mid-year. Both Western Australia and Tasmania were the clear underperformers. 

The value of alteration work approved to existing residential properties nationwide declined by 5.3% to $664.8m (-6.9%yr), while non-residential approvals by value contracted by 20.7% in November to $3.2bn (-20.0%yr), noting the latter can be highly volatile from month to month.

Building Approvals — November | Insights 

November's update was in contrast to the weak report in October and was skewed by volatility from the high-rise segment, particularly in Sydney. Whether this streghth continues on into 2020 following improving conditions in the established housing market remains to be seen. The result for house approvals was encouraging and, given they tend to be much less volatile than unit approvals, may indicate that a stabilisation is on the horizon following the downtrend over much of the past couple of years, but again it is only early days. As such, residential construction activity is likely to continue to weigh on economic activity throughout at least the first half of 2020.