Australian dwelling approvals fell much more than expected in January as detached approvals retraced from record highs ahead of the tapering in Federal Government HomeBuilder grants. January's 19.4% fall came after a 12.0% acceleration in December, with approvals still sharply higher than a year earlier.
Building Approvals — January | By the numbers
- Dwelling approvals (seasonally adjusted) dropped 19.4% in January to 15,926 against the median estimate for a 2% decline coming after December's 12.0% surge, with growth over the year easing to 19.0% from 24.0%.
- House approvals pulled back off a record high falling 11.2% in the month to 12,390 but were still 39.0% higher than a year earlier.
- Unit approvals were 39.0% lower in January at 3,536, widening the decline over the year to -20.9% from -17.3%.
Building Approvals — January | The details
Australian dwelling approvals retraced recent strength with a sizeable 19.4% fall for the month in January. House approvals had soared to a record high in December rising by 16.1% ahead of the end-of-year deadline in the tapering of HomeBuilder grants from the Federal Government from $25k to $15k. This ended a run of 6 consecutive monthly gains for detached approvals, but the uptrend is still well and truly intact with the level nearly 49% above the low point from last June, with conditions improving through a range of policy stimulus measures. Approvals in the higher-density segment fell by a much larger 39.1% in January to their lowest monthly total in 9 years. In general, the relative weakness in higher-density approvals compared with the detached segment reflects the headwinds of the pandemic, particularly very weak migration flows and this is weighing on developer forecasts for demand for this type of housing, while the stimulus measures have mostly been directed towards the detached segment of the market.
Approvals for alteration work to existing houses declined 12.7% in January to around $0.84bn, though this was after a 10.5% rise in December. Today's result combined with base effects to lower annual growth to 10.0% from 40.2%.
Turning to the states, approvals declined across the nation in January. The largest declines were in Queensland (-33.3%) and Tasmania (-24.8%) after those states recorded the fastest rates of growth in December at 25.4% and 65.9% respectively.
But even with January's weakness, house approvals are still at very high levels. The HomeBuilder policy has been particularly effective in boosting approvals in states outside of New South Wales and Victoria, likely because fewer houses in those states qualified for the support under the initial $750k price cap, though they have now been raised from January onwards ($950k for NSW and $850k for Vic).
Building Approvals — January | Insights
There was elevated volatility in today's numbers coming after the pull forward of approvals into December before the tapering of HomeBuilder grants. Holidays through January may also have had some effect on the approvals numbers. But overall the key themes remain intact with detached housing approvals strong while higher-density approvals are mired in weakness.
