Australian dwelling approvals posted a larger-than-expected fall of 8.2% in July, mostly reversing their strong rise in June (12.2%). Approvals were forecast to only come back by 5% for the month. The retracement was all in the higher-density segment (-18.8%) as detached approvals (0.6%) rose for the first time since April. Higher interest rates and capacity pressures within the construction sector are clearly not new headwinds but still seem to be holding back approvals.
National dwelling approvals came in at 15.8k in July after falling 8.2% from their 34-month high in June (17.2k). Despite this latest result, approvals have seen a turn in momentum after being on the slide earlier in the year. Strength in the higher-density segment has been the key factor, with approvals working their way up to average 16.1k over the past 3 months.
Detached or house approvals have consistently come in around 9-9.5k per month so far in 2025. By contrast, higher-density approvals have been highly volatile, falling as low as 5.4k in April before surging to a high of 7.8k in June. The available estimates show that the high-rise segment has been the most volatile as approvals for townhouses and in the low-rise segment have climbed.
Alteration approvals show no sign of easing up rising 1.9% to a new record high ($1.25bn) in July. The higher cost of alterations has been a factor in the rise, but the fact that approvals for new dwellings have struggled suggests there has also been a preference shift within the market. More insights on the volume of alteration work will come to hand in Wednesday's National Accounts for the June quarter.
