Australian dwelling approvals posted their largest rise in more than 2 years in June, increasing by almost 12% in the month on the back of a surge in higher-density approvals. Detached or house approvals declined in June (-1.5%), their third fall in the past 4 months. Approvals have lifted substantially over the past year (27.4%) but remain at levels well contained relative to peaks in earlier cycles. Higher interest rates - even with the RBA now winding back policy restriction - is one factor that is still likely weighing on the home building sector.
Headline dwelling approvals accelerated to their fastest rise since May 2023 with an 11.9% lift in June - well above the 1.8% rise expected. This saw approvals cross 17k for the first time since August 2022, reversing the decline seen over February-April. Driving the surge was higher-density or unit approvals, the volatile segment seeing approvals jump 33.9% to a 30-month high in June (7.8k). By contrast, house approvals were down 1.5% to 9.3k - the level little more than flat on 12 months ago (0.8%).
Despite June's strong rise, approvals declined by 3.4% across the quarter (47.3k). As with the headline result, higher-density approvals - although surging in June - lost ground in the quarter falling by 11.1% (18.9k). This weakness was partially offset by a 2.5% lift in house approvals (28.4k). This gain for house approvals was driven entirely by a strong result in April (6.4%), with declines later coming through in May (-1.1%) and as reported today in June (-1.5%).
Remarkably, alteration approvals continue to remain in an uptrend - despite already being well above the levels that were seen through the pandemic when a range of stimulus measures were supporting home renovations. Alongside rising housing prices, tight housing supply and longer construction timeframes due to labour shortages could be relevant factors driving renovations.
