Australian dwelling approvals lifted by 9.9% in May after heavy declines in the previous two months. Detached approvals are close to returning to their pre-HomeBuilder levels while higher-density approvals remain volatile from month to month.
Building Approvals — May | By the numbers
- National dwelling approvals (seasonally adjusted) lifted by 9.9% in May to 16,390, defying expectations for a 2% decline, but are down 20.9% over the year. The decline in approvals in April was downwardly revised from -2.4% to -3.9%.
- House approvals fell by 2.4% to 9,793 (-29.2%yr), with April's outcome revised from 0.4% to -0.5%.
- Unit approvals rebounded from recent weakness to rise by 35.1% in May to 6,598 (-4.2%yr). Approvals in April fell by 10.3%, downwardly revised from -7.9%.
Building Approvals — May | The details
May's 9.9% rise in national dwelling approvals was driven by a rise in higher-density approvals (35.1%), the segment continuing its run of volatile prints over recent months. Detached approvals declined 2.4% in the month, its third consecutive fall. Aside from an unusually low outturn in January (the timing coinciding with the peak holiday period and the onset of the Omicron wave), detached approvals continue to approach their levels from mid 2020 in the early stages of the HomeBuilder stimulus.
Taking a closer look at higher-density approvals, the underlying data indicated it was largely the high rise segment that drove the increase. There were some large increases in unit approvals posted in May in Sydney, Brisbane and Perth.
Alteration approvals increased by 3.8% and remain at a high level above $1bn. Sharp rises in materials and labour costs has kept the value of alteration approvals elevated despite the withdrawal of the HomeBuilder stimulus last year.
Compared to their respective 2021 peaks, the decline in state approvals ranges from -28% (Qld) to -38% (WA). Approvals in New South Wales have declined by 37% and by 33% in Victoria.
Building Approvals — May | Insights
A stronger-than-expected result for building approvals led by the higher density segment. Approvals are likely to remain in their downtrend given the large volume of work in the residential construction pipeline; housing prices that are now declining nationally as the RBA's rate hiking cycle has ramped up; and ongoing capacity pressures in the construction sector.