Australian dwelling approvals lifted sharply in May but remained well down from their cycle highs. Volatility around the Easter holiday period may have been a factor in the rise in monthly approvals, which came largely from the higher-density segment.
Building Approvals — May | By the numbers
- Dwelling approvals (seasonally adjusted) jumped by 20.6% in May (vs 3% exp) to 15,032, rising from levels around 11-year lows in recent months. Approvals were still 9.8% lower than a year earlier.
- House approvals inched 0.3% higher to 8,193, a decline of 15.6% over the year.
- Unit approvals spiked by 59.3% to 6,839, narrowing the fall in annual terms to 1.7% from 22%.
Building Approvals — May | The details
Dwelling approvals lifted from cycle lows in May, potentially reflecting a backlog of approvals held over from April during the Easter holiday period. The nearly 21% rise in May lifted monthly approvals to their highest since December-22; however, that still left approvals down 35.1% on their cycle high from March-21.
The higher-density segment (59.3%) accounted almost entirely for the increase in approvals in May and mainly in Sydney (NSW), while house approvals saw a modest rise (0.3%). From their respective peaks, house approvals (-43.1%) have seen a much larger decline than units (-21.9%).
Smoothing the elevated volatility on a 3-month average basis, approvals remain around decade lows.
The value of alteration approvals remains at high levels, partly on the back of ongoing demand but also cost increases for labour and materials. With housing prices starting to turn higher again, this may keep alteration activity supported.
Building Approvals — May | Insights
Headwinds from an earlier fall in housing prices, rising interest rates, margin pressures faced by builders and the withdrawal of construction subsidies have seen dwelling approvals decline to very low levels. As this has unfolded, a rapid post-Covid rise in population is putting pressure on the nation's housing stock, seemingly the main factor behind housing prices starting to rise again.
