Australian dwelling approvals saw their sharpest fall in 21 months posting an unexpectedly large decline of 8.8% in March (vs -1.3% expected). Unit approvals (-14.6%) pulled back from their recent uptrend, while house approvals (-4.2%) retraced to early 2024 levels. As seen by today's report, higher interest rates - despite the RBA now easing monetary policy - and capacity pressures in the construction sector - legacies coming out of the pandemic - continue to weigh on home building activity.
Headline approvals were down 8.8% in the March to a total of 15.2k as house approvals fell by 4.2% (8.9k) and unit approvals slumped by 14.6% (6.3k). Those was the largest declines for headline and house approvals since July 2023 and January 2024 respectively.
Still, headline approvals increased over the first quarter of the year to 48.6k, a rise of 3.8% from the final quarter of 2024. An 11.3% surge drove unit approvals to their highest quarterly total (21k) since Q3 2021, strength centred largely in high-rise projects in Sydney and Melbourne. This helped to offset a 1.2% fall in house approvals - their second consecutive quarterly decline - to 27.6k. House approvals for Q1 were only marginally above their pre-pandemic cycle low in late 2019, despite the ensuing surge in population growth.
Approvals for home alterations (-0.7%m/m) remain at elevated levels at just below $1.2bn in the latest month, a rise of 2.9% on 12 months ago. A combination of strong demand - supported by rising housing prices - and cost increases sees the value of alteration work approved on a monthly basis running substantially above pre-pandemic levels.
