Australian new home approvals at high levels, but uneven across states

New home approvals in Australia bounced back in July and remain at very high levels by historic standards, according to the latest figures from the Australian Bureau of Statistics (ABS).

During July 2014, a total of 16,320 dwellings were approved, a 2.5% increase on the previous month. Compared with the previous three month period, approvals were also up by 2.5% and over the 12 months to July new home approvals totaled 195,227.

The increase in building approvals nationally during July was driven largely by a 23.1% increase in Western Australia in seasonally adjusted terms. In Queensland approvals were up by 0.9% but there were significant declines in other states, led by a 7.7% fall in Tasmania, followed by a 5.7% decline in New South Wales, a 4.6% decline in Victoria and a smaller fall of 1.9% in South Australia.

In trend terms, new home approvals increased by 16.7% in the Northern Territory but fell by 9.3% in the Australian Capital Territory during July.

‘These figures mean that Australia’s home building industry has broken yet another record this year. Total seasonally adjusted new home approvals over the past 12 months are the highest since records began back in 1984. Having broken through the 195,000 threshold for the first time, new home building approvals is now at an even higher level than during the 1994 building boom,’ said Housing Industry Association senior economist Shane Garrett.

However, he pointed out that despite this achievement, there have been signs of slowdown in new home building approvals over the past six months. ‘It is also worth bearing in mind that the bulk of the July increase was driven by an exceptional large expansion in Western Australia,’ he said.

‘The key is to ensure that a number of markets, like Sydney for example, achieve sustainably healthy levels of new home over the coming decade which far outweigh what has been built over the last ten years. Numerous government policies across all tiers stand in the way of this objective being achieved,’ he added.

Other ABS figures show residential building work done continued to strengthen in the June 2014 quarter, following healthy growth in March. There was $13.4 billion of residential building work done, some 2.2% higher than in the previous quarter and 9.6% higher than in the June 2013 quarter.

‘These preliminary figures indicate that new home building activity is likely to represent a positive contribution to overall GDP growth in the national accounts figures to be released next Wednesday,’ said HIA economist, Diwa Hopkins.

She explained that a closer look at these preliminary results shows that the detached house segment was the key driver of growth in residential building during the June 2014 quarter, compared with the March quarter when multi-unit building led the charge.

In the June 2014 quarter, new house building work contributed 1.6% points to the 2.2% growth in total residential building work done.

‘These developments are largely in line with what we have been expecting of the current new home building cycle; that larger improvements in detached house building activity would follow in the wake of the previously strong growth experienced by the multi-unit segment of the market,’ said Hopkins.

But she pointed out that conditions in the major renovations segment of the market remained subdued, with the value of this work done down by 2.4% during the June 2014 quarter.

‘National accounts figures will reveal the full story on the renovations market, showing the value of both major and smaller jobs. Data from the March 2014 quarter was displaying tentative signs of improvement and obviously we’d be hoping for this to continue in the June quarter, notwithstanding the less than auspicious results from today’s data release,’ she added.

Property Wire