Australian dwelling approvals posted a large fall in March and contracted for the third consecutive quarter. Since peaking around the middle of last year, house and unit approvals have moved sharply lower following the withdrawal of stimulus measures and capacity constraints in the construction sector.
Building Approvals — March | By the numbers
- National dwelling approvals (seasonally adjusted) declined by 18.5% in March to 15,183, a more sizeable fall than expected (-12%) coming off a rebound in February (42%). Approvals are down 35.6% on a year ago.
- House approvals weakened by 3.1%m/m to 10,020 (-32.8%yr) after lifting by 13.7% in February.
- Unit approvals retraced much of their February surge (106%) with a 37.7% fall to come in at 5,163 (-40.6%yr).
Building Approvals — March | The details
Dwelling approvals posted another volatile outturn, with March's decline (-18.5%) following a large increase in February (42%) and an outsized fall in January (-26.6%). Overall, this left approvals down by 6.7% in the first quarter. This weakness was concentrated in the house segment (-9%q/q), though higher-density approvals also fell (-2.7%q/q).
Q1's fall in approvals extended the declines seen over the final two quarters of last year after the withdrawal of the HomeBuilder construction subsidy. Construction subsidies and other stimulus measures brought forward a significant volume of approvals, leading to a large residential pipeline. With that pipeline a long way from being worked through given materials and labour shortages and rising costs, approvals have been retracing from very elevated levels.
Alteration approvals were flat in the month but remain at an elevated level a bit above $0.9bn. However, over the first quarter, alteration approvals moved lower by 8.9%. Rising costs and shortages of labour and materials are likely to have been a factor here.
Looking across the states, New South Wales saw approvals rise modestly of the first quarter (1.5%) but all other states declined. The largest falls were in Western Australia (-20.4%) and South Australia (-16.2%), with monthly totals in both states back around their pre-pandemic levels. Declines of similar magnitude were seen in Victoria (-7.6%) and Tasmania (-7.9%). Queensland posted a smaller decline (-4.9%) and monthly approvals there are still well above their pre-pandemic levels.
Building Approvals — March | Insights
Around the month-to-month volatility, dwelling approvals remained on a downward trend over the first quarter of the year. Although now well down from the mid-2021 peak, quarterly approvals were still above their range seen over 2019 and into 2020 ahead of the pandemic. The very elevated residential construction pipeline will take time to work through, particularly given the capacity constraints. This could see approvals continue to move lower, while demand could also weaken as the RBA's hiking cycle takes shape over the course of the year.
