Australian dwelling approvals -1.6% in August

Australian dwelling approvals softened broadly as expected in August after rebounding by 12.2% in July that reflected the reopening of the domestic economy. House approvals posted another strong result to be at their highest level since early 2019 but approvals for units remain very weak. 

Building Approvals — August | By the numbers

• Dwelling approvals (seasonally adjusted for the private and public sectors) eased slightly in August by -1.6% to 13,691 after rebounding by 12.2% in the month of July, with the median estimate looking for a larger decline of 2.0% in today's report. Annual growth in approvals pulled back to be near-flat at 0.6% from 6.9%.  

• Unit approvals declined by 12.9%m/m to 4,290 after a 20.3% surge in the month prior. As a result, the pace through the year swung to -18.1% from +9.1%.

• House approvals firmed by 4.6% to 9,402 following on from an 8.1% boost in July. This is its highest level since January 2019. In annual terms, house approvals are up by 12.3%.

Building Approvals — August | The details 

August's report contained mixed details as house approvals lifted for the second straight month coming out of the shutdown but this was more than offset by a fall in unit approvals. The underlying detail (which is not seasonally adjusted) suggested that the weakness in unit approvals in August was concentrated in both the low rise and high rise segments.

Approvals for alteration work to residential properties is now becoming quite elevated in response to the Federal Government's HomeBuilder scheme that offers grants of $25k to put towards a substantial renovation (contract value between $150k-$750k) for contracts entered into between 4 June and 31 December 2020. Approvals of this type lifted by a further 7% in August to $784.3m, with $2.2bn of work having been approved over the past 3 months (see chart, below). Note HomeBuilder also applies to new builds (provided the value of the house does not exceed $750k), so this could also be a factor in driving house approvals higher of late. Non-residential approvals, which are very volatile month to month, look to be improving out of the shutdown with around $12.1bn in approvals going through over the past 3 months.   

Building Approvals — August | Insights 

As expected, approvals softened in August after rebounding sharply in July. The effects of the Government's HomeBuilder scheme are clearly evident in the alterations component of today's report, which is a positive outcome amid a highly uncertain outlook for residential construction given the prevailing weak economic conditions post the initial COVID shock and border restrictions slowing population growth.