Australian dwelling approvals lifted by a stronger-than-expected 5.5% in May (1.7% forecast), posting their sharpest increase since last October. Backward revisions lifted approvals over prior months to make this the fourth consecutive month-on-month rise for dwelling approvals. Nonetheless, dwelling approvals remain at low levels reflecting the interest-rate sensitivity of the home building sector as well as legacy issues from the pandemic that have held back construction activity.
Dwelling approvals in May lifted by 5.5% to 14.2k, their fourth consecutive rise following revisions to prior months. These revisions also lifted the level of approvals, with the May figure coming in at a high since November last year. Approvals for the 3-months to May averaged 13.6k, marginally above the cycle lows of around 13k.
Approvals for detached houses were up by 1.3% in the latest month and were 12.1% higher over the year, bringing the level in May (9.3k) to its highest since October 2022. House approvals have surged in Western Australia over the past year (65.7%) and have also risen in Queensland (14.2%), New South Wales (8.2%) and Victoria (4.8%).
Turning to the higher-density segment, approvals posted a 14.2% rise - their sharpest increase in 12 months - reaching a total of 4.9k. The detailed data indicates that much of the strength from the May result related to high-rise units, with townhouses and low-rise projects also contributing.
Alteration approvals fell sharply in May, down 9.3% on the month to around $1.05bn. This may reflect the impact of changes to national building codes (effective 1 May) that have increased regulatory requirements for construction, adding additional cost. Ahead of these changes, alteration approvals saw strong rises in March (8.3%) and April (3.4%).
