Australian dwelling approvals fell sharply for the second month in succession posting a 6% month-on-month decline in August after contracting by a downwardly revised 10% in July. Approvals had been expected to rebound modestly by 2.8% in August. These consecutive declines have seen approvals slide from a 34-month high in June (17.4k) to now stand at their lowest level in a year (14.7k). Although RBA rate cuts appear to have helped drive an uplift in housing prices, the effect on the housing construction cycle looks limited at this stage.
Dwelling approvals nationally fell by 6% in August to 14.7k, their lowest figure since August last year. Both major segments contributed to this result: unit approvals fell by 10.6% (5.6k) and house approvals were down by 2.8% (9.1k). On a 3-month average basis, house approvals are tracking at 9.3k and unit approvals at 6.7k - levels that, as the chart below shows, are well below the highs from earlier cycles.
By contrast with the softness in approvals for the housing construction pipeline, alterations continue to remain strong. The value of alteration work approved actually fell 9.9% in August but remains at an elevated level ($1.1bn). This partly reflects inflationary effects on these costs over recent years but there is also a demand element at play. The recent June quarter national accounts reported that alteration work by volume rose 4.9% through the year.
