Australian dwelling approvals lifted by a well above consensus 6.3% in January (0% expected, prior 1.7%), rising to their highest level (16.6k) since the end of 2022. From low levels, approvals trended higher through 2024 - momentum that has continued early in the new year. High-rise approvals in Sydney were the key driver of approvals growth in January, which was also supported by house approvals (1.6%) after a run of 3 consecutive declines.
Headline dwelling approvals were up 6.3% in January 2025 compared with December 2024. Over the 12 months to January 2025, approvals increased by 21.7%. While these gains lifted approvals to their highest total in 25 months at 16.6k, that is a level almost 30% below the cycle peak in March 2021 (22.9k). Unit approvals surged 12.8% month-on month to 7.3k - also a 25-month high - driven by high-rise approvals in Sydney (40.2%). Meanwhile, a 1.6% rise came through in house approvals - their first increase in 4 months.
Yesterday's National Accounts for Q4 reaffirmed that the sensitivity of the home building sector to higher interest rates as well as cost pressures and labour constraints - long-lasting legacies from the pandemic - have weighed on residential construction (see here). But the improving momentum in approvals suggests those headwinds are at least easing, with the latest data coming ahead of the RBA's rate cut in February. For the 3 months through January, approvals averaged 15.6k, up 14% on 12 months ago. The momentum is currently with the higher-density segment; approvals there averaging 6.6k over the past 3 months, an uplift of 27.3% over the year. After trending higher since the middle of 2023, house approvals have started to ease back averaging 9.2k over the past 3 months but still up 6.1%yr.
Alteration approvals rose by 1.1% in the opening month of 2025 to $1.1bn, up 8.7% on 12 months ago. Inflation pressures have (likely) permanently raised the cost of alteration work, with these approvals significantly above where they used to come in prior to the pandemic. The volume of alteration work in the National Accounts was reported to have risen by 1% through the year to Q4.
