Australian dwelling approvals rebounded by 7.5% in October, rising to their highest level (14.2k) in 5 months. This far exceeded the consensus expectation (1.7%) following a 4% fall in September (revised from -4.6%). A surge in unit approvals (19%) drove the headline increase, with house approvals (1.2%) also supporting. Approvals, however, remain at low levels at a time when housing supply in Australia has been pressured by population growth.
There was a welcome upside surprise for dwelling approvals in October, with a 7.5% increase lifting the monthly total to 14,223, its highest since May. This comes amid housing supply in Australia coming under significant pressure from rapid population growth following the Covid years and capacity constraints holding housing completions to subdued levels. Higher interest rates have been another headwind, although housing prices have risen alongside the RBA's hiking cycle, reflecting the demand-supply dynamics described. This is of course a very volatile series, meaning little signal can be taken from any given month. Taking a 3-month average to smooth the volatility, approvals sit just off cycle lows having declined in the order of 35% from their 2021 peaks.
Unit approvals surged in October (19%) but that came after declines in 3 of the past 4 months. The underlying detail in the report suggests that the lift this month was driven by major increases in approvals from Brisbane and Perth. By dwelling type, the low-rise segment led the way with high-rise approvals declining.
Detached or house approvals lifted by 1.2% in October and are broadly in line with the low levels that were seen ahead of the pandemic. These approvals are around 40% below their cycle high in early 2021.
With new builds - especially in the detached segment - remaining challenged, alterations have remained at elevated levels following their surge during the pandemic. However, the value of alteration work approved fell in October (-3.2%) to be down 2.4% over the year.
