Australian dwelling approvals started 2023 with a large decline in January, taking another leg lower as the impact of the RBA's tightening cycle takes hold. Both detached and unit approvals declined in the month.
Building Approvals — January | By the numbers
- Dwelling approvals (seasonally adjusted) fell by 27.6% in January — much larger than the 7% decline expected — to 12,065 (-8.4%yr), its lowest level since mid-2012. Approvals were coming off a 15.3% increase in December.
- House approvals declined by 13.5% to 7,664 — their 5th fall in succession — to be 12.2% lower over the year.
- Unit approvals were down heavily (-43.6%), unwinding from a surge in December (44.5%) to come in at 4,402 (0.7%yr).
Building Approvals — January | The details
Dwelling approvals showed extreme volatility over December-January: a 15.3% rise was followed up by a 27.3% slump. Averaging out the last 3 months, the level in January at 14.4k was the lowest since the depths of the pandemic in 2020. Whereas the slide in dwelling approvals over 2021 was driven by the unwinding of construction subsidies, this latest leg lower is responding to the RBA's rate hiking cycle and falls in housing prices.
As this next chart shows, approvals are on the slide in most states. The fastest pace of decline appears to be occurring in New South Wales. Queensland is showing some resilience as approvals have lifted over recent months.
Alteration approvals (value terms) declined by 4% in the month to $0.97bn, slightly higher than a year ago (1%). Yesterday's national accounts reported that the volume of alteration work declined by 9% over the year to Q4. The discrepancy reflects the upward pressure on building costs due to materials and labour shortages.
Building Approvals — January | Insights
The interest sensitivity of the housing sector is driving weakness in dwelling approvals. Housing prices have fallen by around 9% nationwide since the RBA's tightening cycle commenced, which is another factor behind the slide in approvals.
