Australian dwelling approvals for May fell by 1.1%, their fifth decline in the past 6 months as high-rise unit approvals have scaled back. By contrast, house approvals (3%m/m) brought strong momentum into the RBA's tightening cycle, reaching their highest level since the stimulus-driven surge coming out of the pandemic in late 2021. Meanwhile, data centres continued to see non-residential approvals soar.
Residential approvals were down 1.1% month-on-month in May to 17k, a downside result on expectations (0%) but still up by 5.3% over the year. This saw the 3-month average (17.2k) ease back slightly, though approvals are still up sharply from cycle lows seen a couple of years ago.
Approvals continued to diverge across segments. Unit approvals fell a further 7.3% to 6.3k (-5.9%yr); however, house approvals lifted 3% to their highest since September 2021 (10.7k) and are up by more than 13% over the year. The key question for the housing segment moving forward is the impact of the RBA's tightening cycle, with dwelling construction a highly interest-sensitive sector. The tax changes to housing around the treatment of capital gains and negative gearing in the recent federal budget shape as another key uncertainty. Housing prices are wavering on these effects; however, underlying demand for housing due to population growth over recent years remains strong.
In the non-residential segment, data centres continued to dominate. Work approved increased 41% on the back of a 22.9% gain in May, surging to record highs at almost $11bn in the month, up around 65% on a year ago. Much of the activity in data centres is concentrated in New South Wales and Victoria.
