Australian dwelling approvals rebounded sharply in February (21.6%), surging clear of market forecasts to almost fully reverse the decline from January (-19.4%) that appears seasonally related. House approvals advanced to a new record high level with developers bringing forward projects ahead of the end of March deadline for the HomeBuilder grants scheme.
Building Approvals — February | By the numbers
- Dwelling approvals (seasonally adjusted) rebounded by 21.6% in February to 19,422 compared to the median estimate for a 3.0% rise. Approvals fell by 19.4% in January. Annual growth in approvals lifted to 20.1% from 19.3%.
- House approvals bounced to a new record high rising by 13.7% in the month (after falling by 10.8% in January) to 14,072 to be up by 57.9% over the year.
- Unit approvals lifted by 48.9%m/m (prior -39.5%m/m) to 5,350, though the annual decline steepened to -26.3% from -19.6%.
Building Approvals — February | The details
January's 19.4% decline in dwelling approvals has proved transitory with the headline figure rebounding by 21.6% in February. In my assessment, January's decline can likely be put down to a lower volume of approvals being processed, consistent with the large fall in hours worked in the month (-4.9%) when a larger than usual share of the workforce was taking annual leave. Looking through January's report, approvals roughly returned to where they were in December sitting at an elevated level north of 19.0k. Detached house approvals established a new record high at 14,072 on the back of a 13.7% rebound in the month, moving past the previous high set in December (13,865). This lift came in advance of the end of the extension period in the HomeBuilder grants scheme occurring on March 31. Private sector house approvals have risen by around 5,700 dwellings (or around 70%) since HomeBuilder commenced last June. Higher density approvals have been volatile from month to month but the level is sharply lower than a year earlier (-26.3%), largely reflecting the effects of the pandemic on this segment with developers shelving projects as border restrictions have hit migration flows.
Aside from new builds, alteration approvals have also surged since the commencement of HomeBuilder rising by one-third over the period. The value of alteration work to existing homes rebounded by 11.1% in February to $0.973bn (36.0%yr) after a 10.1% decline in January.
Approvals rebounded across the nation in February with most states recording large gains after pulling back in January, with the strength evident in both the detached and higher density segments. Going against this trend was South Australia (-3.4%) after approvals there advanced in the month prior (7.0%).
Building Approvals — February | Insights
Temporary weakness from January was mostly reversed with dwelling approvals rebounding much more sharply than expected in February. A final lift is likely to come through in March before the HomeBuilder scheme expires. Policy support from low rates and government incentives has created the conditions for a sharp upswing in residential construction work in 2021 after the downturn that occurred between mid-2018 to mid-2020.
