Australian dwelling approvals posted a stronger-than-expected rise in August, rebounding from a sharp fall in July. House approvals have retraced from the Covid stimulus-driven surge but remain around levels seen at the peaks in prior cycles, showing resilience to the headwinds being faced by the home building sector.
Building Approvals — August | By the numbers
- Dwelling approvals (seasonally adjusted) rose by 28.1% in August to 17,497, coming in well above expectations (10.0%) and rebounding from a large fall in July (-18.2%). Approvals are down 9.5% over the year.
- House approvals posted their strong rise since Feruary lifting by 3.7%m/m to 10,526, but are down 14.9% from a year ago.
- Unit approvals nearly doubled in August (98.6%) to 6,972, recovering from a steep decline in July (-47.3%).
Building Approvals — August | The details
National dwelling approvals continued their volatile pattern of late rising sharply in August (28.1%) on the back of a rebound in the higher-density segment (98.6%) and a strong outcome from detached approvals (3.7%). Averaging out the volatility, house approvals look to be rising gently higher while the higher-density segment is struggling to break out of its relatively low range.
August's gain in house approvals was driven mainly by New South Wales (11.4%) while Western Australia (10.0%) also made a strong contribution.
For higher-density approvals, the underlying trends point to a softening in the high-rise segment over recent months. Despite rebounding in August, much of the weakness in the high-rise approvals has been coming through from Sydney and Melbourne.
Turning to alterations, the value of residential work approved saw a 5.4% rise in August after falling over the two months prior. As the chart below shows, alterations remain at very elevated levels well after the withdrawal of policy stimulus. Aside from reflecting rising materials and labour costs, this is also likely boosted by a backlog of projects that have been previously held back due to capacity constraints.
Building Approvals — August | Insights
House approvals are holding up despite headwinds from rising interest rates, falling housing prices and capacity constraints in the construction sector. Approvals in the higher-density segment are very volatile from month to month, but the high-rise category looks to have softened over recent months.