Australian dwelling approvals lifted for the second month running on the back of strength in the higher-density segment. For the December quarter, dwelling approvals fell as the post-HomeBuilder unwind continued.
Building Approvals — December | By the numbers
- National dwelling approvals (seasonally adjusted) closed out 2021 with an 8.2% gain in December to 17,698 vs the median estimate for a 1% fall. Approvals in November lifted by 2.6%, revised down from 3.6% in today's report. 12-month approvals are down 7.5%.
- House approvals declined by 1.4% to 10,617 (-20.8%yr). November's initially reported rise (1.7%) was revised to a 1.4% fall.
- Unit approvals followed up November's 11.2% rise with a 26.7% boost in December, the monthly aggregate advancing to 7,081. Approvals in the segment are up 23.5% over the year, with the base period coming around the time of their pandemic-related lows.
Building Approvals — December | The details
Strong increases in the higher-density segment saw dwelling approvals post back-to-back monthly gains for the first time since February-March. However, despite seeing an 11% over the final two months of the year, approvals still contracted by 9.5% over the quarter. In Q3, approvals fell by 10.9%. This sharp decline in approvals over the second half of 2021 reflects an unwind from very elevated levels after the withdrawal of the HomeBuilder construction subsidy.
This has impacted the detached segment, with quarterly approvals down 6.4% after rolling over by 17.1% in Q3. However, Q4's total was still substantially higher than pre-pandemic levels and exceeded the levels seen at the peak of the previous cycle through 2017-18. Higher-density approvals declined in Q4 (-14.7%) despite the strong increases in November (11.2%) and December (26.7%) — with the state of Victoria the major contributor. For context, the quarterly total for higher-density approvals was around 25% above the depths seen in mid-2020.
Alteration approvals surged under the support of the HomeBuilder stimulus but have remained at elevated levels despite the closure of the scheme. Effects relating to the pandemic (spending patterns and working from home), rising materials and labour costs and the strength in the housing market could all be factors in sustaining alteration approvals at historically high levels.
Approvals in the non-residential space were weak over Q4 falling by 6.7%. The available detail suggests that weakness was broad-based across commercial, industrial and office projects.
Building Approvals — December | Insights
Dwelling approvals fell substantially from their peaks earlier in 2021 following the closure of the HomeBuilder scheme. The scheme, together with other stimulus measures, brought forward a large volume of approvals and this has led to a very large pipeline of residential construction work. Even after unwinding, approvals remain at historically high levels.
