Australian dwelling approvals posted a 3.6% increase in November for their first month-on-month rise since August. Though approvals are now sharply off their HomeBuilder-driven peak they are still at a relatively high level, adding further to an already elevated residential construction pipeline.
Building Approvals — November | By the numbers
- National dwelling approvals (seasonally adjusted) lifted 3.6% over the month in November to 16,448, slightly outperforming expectations for a 3% rise. This was off the back of a 13.6% fall in October (revised from -12.9%). 12-month approvals were down 7.7% from -8.2%.
- House approvals lifted by 1.7% to 11,040 but are 8.1% lower than a year earlier.
- Unit approvals advanced 7.5%m/m to 5,408 after falling sharply in October (-36.5%). Approvals over the year are down 6.9%.
Building Approvals — November | The details
After back-to-back falls, monthly approvals lifted by 3.6% in November driven by a boost from the higher density segment in most states. The federal government's HomeBuilder scheme to support the construction sector during the pandemic brought forward a significant volume of approvals, which peaked in April when it was closed off to new applicants. Approvals have since been unwinding but remain substantially above their 2019 levels thanks to elevated detached approvals. Low interest rates, first home buyer incentives and rising housing prices have meant that there have still been strong tailwinds behind detached construction despite the withdrawal of HomeBuilder.
However, in November it was the higher-density segment (7.5%m/m) that drove the overall rise in approvals with the detached segment rising modestly (1.7%m/m). Outside of New South Wales, the other states posted increases in higher-density approvals this month. Total approvals across the states are mostly well above pre-pandemic levels but in New South Wales they have retraced more sharply, potentially reflecting the disruptions associated with the Delta lockdowns.
Meanwhile, approvals for alterations continue to remain very elevated despite no longer attracting the HomeBuilder grants. Nationally, $0.97bn of alteration work was approved in November compared to $1.16bn at the peak in August. Rising housing prices, improving conditions in some major rental markets and pandemic-related shifts such as working from home and changes in consumption patterns are supporting the demand for renovations.
Building Approvals — November | Insights
Despite retracing by more than 25% from their earlier 2021 peak, approvals remain at a relatively high level. This also needs to be viewed in the context of the elevated residential pipeline, particularly in the detached segment. Capacity constraints and lockdowns disruptions were a headwind to residential construction over the past couple of quarters but there is a tremendous volume of work to be completed which will be supporting economic growth through 2022.
