Australian dwelling approvals rebounded sharply in February from a disrupted start to 2022 due to the combined effects of the Omicron wave and summer holiday period. Unit approvals more than doubled from the month prior to drive a 43.5% increase in headline approvals.
Building Approvals — February | By the numbers
- National dwelling approvals (seasonally adjusted) rebounded by 43.5% to 18,675 in February (-7.8%yr) following January's 27.1% fall (revised from -27.9%). The median forecast was for a 5% rise in February approvals.
- House approvals lifted by 15.6%m/m to 10,344, reversing the 16.2% decline in January. Approvals in the segment are down 27.4% over the year.
- Unit approvals came in at 8,331, more than twice their January total (104.8%m/m). Annual growth in approvals swung from -9.4% to 38.7%.
Building Approvals — February | The details
Seasonal effects and Omicron-related disruptions drove a large fall in building approvals at the start of 2022 that was subsequently reversed in February. Going back to December, approvals had accelerated by 9.6%m/m to close out the year.
Smoothing out the volatility, the 3-month average for approvals over this period was around 16.5k. This is well down from the HomeBuilder-driven peak that averaged around 22k for the 3-month period to May last year but slightly above their average from just before the pandemic (15.2k). House approvals are still comfortably above their pre-pandemic average while unit approvals are close to their average from early 2020.
At the state level, 3-month average approvals have bounced in both New South Wales and Victoria, potentially reflecting some catch-up from the disruptions through the period of the Delta lockdowns. In particular, an uplift in unit approvals in Sydney and Melbourne has been key. In the other states, approvals have been retracing with the withdrawal of the HomeBuilder stimulus appearing to be the driving factor.
Alteration approvals remain at elevated levels, though they have declined in value by 16.8% since the end of 2021. Although there is a lot of volatility around seasonal effects and Covid disruptions, there could be some signs here that higher materials prices and labour costs and trade shortages may be starting to weaken demand for renovations.
Non-residential approvals bounced in February after declining over the back half of 2021 when uncertainty around the pandemic was weighing on business sentiment, potentially holding back the advancement of investment plans. The monthly result in February at $6.1bn was the highest since April 2021.
Building Approvals — February | Insights
February's rebound took monthly dwelling approvals to around 18.7k and close to their level at the end of Q3 2021. On top of underlying demand, some catch-up from a disrupted start to the year likely contributed to the strength of today's result. This is most evident in New South Wales and Victoria, particularly in the higher-density segment in the capital cities. The earlier surge in approvals from mid-2020 into 2021 on the back of the HomeBuilder stimulus has left a very large pipeline of residential construction work that is still far from being completed.