Oz building approvals near record high

Photo credit: 8LettersUK

The data shows that there is "strength in the sector", says the Housing Industry Association. Indeed, approvals dipped 5 per cent in February from January but have now risen over 20 per cent year-on-year.

“Typically, approvals can take about six months to translate into activity on the ground,” explains Senior Economist Shane Garrett. “A continuing strong volume of new supply will flow through to help alleviate dwelling prices for the existing stock.

The growth in approvals has been fuelled by detached houses more than multi-units. Indeed, in the three months to February, detached house approvals rose by 7.3 per cent while multi-unit approvals fell by 6.9 per cent.

“With approvals declining in four states, the market recovery cannot yet be described as broad-based,” notes Garrett, highlighting the welcome decision from RBA to keep interest ratest low. “It is therefore important that policy settings remain favourable to stronger housing activity."

Nonetheless, the overall uptick in construction activity is a positive sign for the Australian market, which has seen prices driven up by demand from overseas investors to the detriment of local buyers.

“Strong residential building activity is a good thing for affordability," adds Garrett. "Recent growth in approvals has been driven more by detached houses than by multi-units."