Australia: Dwelling approvals surge 10.9% in June - Westpac

Matthew Hassan, Research Analyst at Westpac notes that Australian dwelling approvals surged 10.9% in June, guided by the bumpy high rise pipeline combines with clear lift in non-high rise activity.

Key Ques

“Dwelling approvals were much stronger than expected in the June month, rebounding 10.9% from a 5.4% drop in May. Westpac and the consensus forecast was for a 1% gain. Our view was based on high rise approvals levelling out after a sharp pull-back over the previous 12mths with some strength showing through in non-high components, reflecting a recent lift in construction related finance approvals. Instead high rise approvals rebounded strongly month to month – still more likely to be noise than a renewed uptrend – but non high rise segments also posting a strong gain.”

“Private sector detached house approvals rose 3.4%in the month, to be up nearly 2%qtr over Q2 as a whole. High rise approvals look to have jumped about 14% but were still down for Q2 as a whole and about 20% below year ago levels. Interestingly, ‘mid rise’ unit approvals surged 30% in the month – this small segment tends to be more stable than high rise but may be finding more favour with developers (vs high rise) in part due to changes in state government planning policies.”

“By state, the high rise jump was concentrated in NSW. The lift in non-high rise approvals was broadly-based, NSW up 11%, Qld up 9% and Vic up 5%.”

“Other data on the value of renovation and non res building approvals continue to point to a lift in these segments.”

“Overall, while the headline surge is clearly flattered by month to month noise in the high rise segment, the gains in non-high rise approvals look more ‘genuine’. That should provide a little more counter-weight to the high rise construction boom wind down that is expected to dominate activity from late this year although it remains to be seen how enduring the strength in ‘non high rise’ segments in recent months will prove to be.”