Australian dwelling approvals posted a better-than-expected result in June and recording their first quarterly rise in a year. After an extended downturn, that may yet have further to run, both the house and unit segments contributed to the quarterly rise in dwelling approvals.
Building Approvals — June | By the numbers
- National dwelling approvals (seasonally adjusted) were broadly flat in June (-0.7%m/m) at 16,461 against the median estimate for a 5% decline. Approvals have fallen by 17.2% over the year. In the previous month, approvals lifted by 11.2% (revised from 9.9%).
- House approvals increased by 0.9% to 9,910 (-22.1%yr) following a 1.8% fall in May.
- Unit approvals were down by 3.1% month-on-month to 6,552 (-8.4%yr). Approvals in the segment spiked in May rising by 37.6%.
Building Approvals — June | The details
Having receded from their cycle high reached in early 2021, dwelling approvals stabilised over recent months to rise by 2.4% in the June quarter. Both house (2.2%) and unit approvals (2.9%) lifted in the quarter, their first quarterly increases since Q1 2021 and Q3 2021 respectively.
The quarterly total for detached house approvals was 29.7k, well down from the peak in Q1 of last year at around 41k. Higher-density approvals came to 18.2k in the June quarter, broadly in line with pre-pandemic levels. The underlying data indicated that high rise approvals lifted strongly over the quarter; low rise approvals contracted and townhouse approvals were broadly flat.
On the alterations side, the value of alteration work approved declined in June (-2.2%) but still advanced by nearly 4% in the quarter. The surge in materials and labour costs has contributed to keeping alteration approvals very elevated long after the HomeBuilder stimulus has wound down.
Turning to the states, dwelling approvals posted quarterly declines in New South Wales (-2.3%) and Victoria (-3.5%), the latter being driven by weakness in the higher-density segment (-13.6%). The other states all saw quarterly rises led by unit approvals: Queensland 2.5%, South Australia 13.5%, Western Australia 34.8% and Tasmania 10.9%.
Building Approvals — June | Insights
After declining sharply for more than a year, dwelling approvals showed signs of stabilising in the June quarter. That comes despite the already very elevated level of work in the pipeline, capacity constraints in the construction sector and housing prices starting to decline with interest rates on the rise. Dwelling approvals appear likely to come under renewed pressure given these headwinds.