Australian dwelling approvals declined in June but posted their first quarterly rise in 12 months. Higher density approvals have rebounded from cycle lows, but house approvals are at decade lows.
Building Approvals — June | By the numbers
- Dwelling approvals (seasonally adjusted) pulled back by 7.7% in June to 13.8k following a 20.5% rise in May. Approvals are down 18% over the year.
- House approvals declined by 0.8% to around 8.2k, a fall of 16.9% on 12 months ago and 43.2% below the cycle high from March 2021.
- Unit approvals unwound by 16.2% to around 5.7k after a 60.1% uplift in May, leaving these approvals down by 19.6% over the year.
Building Approvals — June | The details
Dwelling approvals slid in June (-7.7%) but posted their first quarterly rise in a year (6.2%) and the strongest gain since Q1 2021. The June decline came after the volatile unit or high-density segment partly unwound (-16.2%) from a spike in May (60.1%), while house or detached approvals were marginally lower in the month (-0.8%).
For the June quarter, unit approvals rebounded to rise by 20.1% as house approvals fell by 1.5%, declining for the third quarter in succession. As the chart below shows, quarterly approvals remained at low levels - the effects of rising interest rates, earlier falls in housing prices and margin pressures faced by homebuilders all headwinds. In these circumstances - and with homebuilders already working through a record-high pipeline of houses under construction - the flow of new approvals has slowed significantly.
By type, approvals for detached housing continued to ease over the quarter to be at 10-year lows. In contrast, higher-density approvals have trended up on the back of high-rise and townhouse developments.
Alteration approvals remain at a high value reflecting strong demand and increased costs associated with home renovations. Meanwhile, non-residential approvals have surged over recent months, though this in part reflects higher construction costs.
Rising non-residential approvals has been driven mostly by commercial and industrial projects. To a lesser extent, office approvals have also been supportive.
Building Approvals — June | Insights
Dwelling approvals rebounded in the June quarter, albeit coming off a very low base. The higher-density segment drove the increase as house approvals remained at decade lows in Q2. Rising interest rates and other headwinds faced by homebuilders have weighed significantly on the flow of approvals.
