Building Approvals — December | By the numbers
- Dwelling approvals (including the private and public sectors) on a seasonally adjusted basis were broadly stable in December, easing by -0.2% to 14,752, with the market anticipating a fall of 5.0%. Approvals in November accelerated by 10.9% (revised down from 11.8%).
- In annual terms, growth in dwelling approvals swung from -2.8% to 2.7%; turning positive for the first time since June 2018.
- House approvals were steady in the month (-0.1%) at 8,593 after posting a 6.0% rise in November (revised from 6.2%). The annual decline eased from -9.0% to -6.9% to be contracting at its slowest pace in 11 months.
- Unit approvals posted a very minor decline of 0.3% in December, which followed an 18.6% escalation in the previous month (revised from 20.8%), to come in at 6,159. In through-the-year terms, the pace accelerated from 7.3% to 19.9% to its fastest since March 2018.
Building Approvals — December | The details
Coming off a 10.9% surge in November, dwelling approvals were broadly unchanged (-0.2% or -26) in December. Note that approvals have now outperformed consensus in the past two months; in November the market had forecast approvals to rise by only 2.0% and then in today's release they had anticipated a 5.0% pullback. Incorporating October's weak result (-6.3%), approvals totaled 42,852 in Q4 for a 6.1% rise on the previous quarter's total (40,389). As the chart (below) shows, this was the first positive quarter for approvals growth since Q4 2017.
Unit approvals drove this increase rising by 16.6% in Q4 to 17,452, while house approvals were near-stable on the quarter (-0.2%) at 25,310.
The ABS's detailed estimates, which are not seasonally adjusted, suggest the high-rise segment has been driving the increase in unit approvals, though low-rise approvals also appear to have lifted modestly.
Turning to the states, volatility in this month's report was elevated. Approvals in New South Wales pulled back sharply in the month (-30.5%), though this came after a 50.5% rise in November and was also mitigated by a 34.0% acceleration in Victoria. Queensland approvals contracted for the third straight month with a 5.7% fall in December, while South Australia (-20.1%) and Tasmania (-8.9%) both recorded sharp declines. Western Australian approvals posted a 5.4 rise in the month, though this only retraced November's decline.
The next chart highlights Victoria as the leading contributor to approvals growth in Q4 (+26.7%) and over the past year (+38.5%), though New South Wales posted a modest gain in the quarter (+1.2%) and improved from a sharp contraction in Q3 (-14.8%). Elsewhere, the profile has been weak.
Also in today's report, the value of non-residential approvals bounced back from a weak month prior surging by 30.9% in December to $4.351bn (25.4%yr). Meanwhile, the value of alteration work approved to existing residential properties fell by 1.8% to $651.7m to steepen the annual decline from -6.7% to -10.2%.
Building Approvals — December | Insights
Momentum in dwelling approvals appears to be stabilising after falling sharply over the past couple of years. Unit approvals improved notably over the December quarter, however approvals of the type are volatile from month to month so it remains to be seen whether this is temporary or the start of a more sustained improvement from very weak levels. Given their relative stability, house approvals appear more than likely to have leveled out but again are at a low level. Overall, residential construction activity is likely to remain a drag on economic activity through much of 2020, reflecting the earlier weakness in dwelling approvals, though there are signs this weakness is past its trough.
