Australian dwelling approvals posted a larger-than-expected fall in October as a recent rise in higher-density approvals was retraced. House approvals lifted but were coming off a sizeable decline in September.
Building Approvals — October | By the numbers
- Dwelling approvals (seasonally adjusted) fell 12.9%m/m in October to 15,911 (prior: -3.9%m/m) against the market forecast for a decline of 1.5%. Annual growth in approvals turned negative (-8.1%) for the first time since June 2020.
- House approvals advanced 4.5% on the month to 10,906 to be 4.4% lower over the year. This followed a 15.2%m/m fall in September.
- Unit approvals were down 36.1%m/m to 5,005 after rising sharply in the previous two months. Annual growth swung to -15.1% from 45.5%.
Building Approvals — October | The details
Volatility in the higher-density segment led to a 12.9% fall in dwelling approvals in October. In percentage terms, this was the largest month-on-month fall seen since May 2020. Approvals have been retracing their earlier surge over recent months following the end of the HomeBuilder scheme to new applicants in mid-April. As a result, detached house approvals and approvals for renovations (2.6%m/m), which could also qualify for the grants if certain criteria were met, are now well off their peaks from earlier in 2021. Capacity constraints in the construction sector and recent lockdowns may also be weighing on approvals, though on the other hand housing prices nationally are still on the rise.
Higher-density approvals had lifted sharply over August-September (32.9%), but the decline in October (-36.1%) more than retraced this move. In particular, the high-rise segment in Sydney drove the decline, though Melbourne also showed weakness in this space. Overall, though, higher density approvals in the nation's two largest cities are well off the low levels seen following the onset of the pandemic.
At the state level, total building approvals in New South Wales were down 29.4%m/m with smaller declines coming through from South Australia (-8.1%), Western Australia (-2.7%), Victoria (-2.0%) and Tasmania (-1.8%). Queensland went against the trend with a 2.2% rise.
Building Approvals — October | Insights
The residential construction pipeline is very elevated following the run up in approvals seen from mid-2020 on the back of significant stimulus measures. House approvals are well off their peaks but are still elevated on pre-pandemic levels even after some of the stimulus measures have been wound back. Higher density approvals have been volatile from month to month in 2021 but are on a rising trend.