Australian dwelling approvals came in stronger than expected rising by 3.8% in the month of October against an expected pullback of 3.0%. House approvals elevated further (3.2%) to be at their highest level since early 2000 helped by significant policy support measures since the national shutdown was eased.
Building Approvals — October | By the numbers
- Dwelling approvals (all sectors, seasonally adjusted) advanced by a further 3.8% in the month of October to 16,584 against the median estimate for a 3.0% decline; this after a 16.2% surge in September (revised from 15.4%). The annual pace has lifted to 14.3% from 9.9%.
- House approvals lifted for a 4th straight month rising by 3.2% in October to 10,936 — its highest level since February 2000 — elevating annual growth to 33.1% from 23.7%.
- Unit approvals firmed by 5.1% to 5,648, but the level is sharply lower than a year earlier at -10.3%.
Building Approvals — October | The details
Australian detached house approvals continue to rise sharply on the back of support from policy stimulus measures. Very low interest rates, the HomeBuilder scheme and additional incentives and supports for first home buyers are all contributing to the momentum. Since the most recent trough in June associated with the national shutdown, house approvals have surged up by 31% as these measures have been introduced. Meanwhile, unit approvals are coming off a low base and this segment faces headwinds from unfavourable supply and demand dynamics due to the completion of earlier projects coming alongside the impact of the international border closure, while investor sentiment has been affected by elevated capital city vacancy rates. The chart below using the disaggregated data (which is not seasonally adjusted) shows these themes playing out.
Another area benefitting from policy support, most notably the HomeBuilder scheme, as well as pandemic-related shifts such as spending more time at home is in residential alterations. While the value of residential alteration work approved declined in October (-3.3%), the level is sharply up over the year (9.4%) at $0.78bn and has surged by 21.5% from its recent April trough.
Building Approvals — October | Insights
October's 3.8% gain in approvals was its third rise in the past four months since the easing of the shutdown. The acceleration in approvals over the period (31.4%) has been driven by the detached house segment on the back of a raft of policy stimulus measures — all of which are proving to be very impactful in the sector. The recent extension announced by the Federal Government to the HomeBuilder scheme for an additional 3 months (to the end of March 2021) with widened eligibility criteria, but at a lower level of support ($15k down from $25k) should help continue the momentum for a little longer.
