NSW apartments help drive 11% rise in approvals

In trend terms, the number of dwellings approved rose 0.2 per cent in July 2016, marking the eight month in a row that approvals have risen.

In all, dwelling approvals rose in NSW (2.4 per cent) and Vic (0.5 per cent) but decreased in Tas (3.7 per cent), NT (3.2 per cent), ACT (2.6 per cent), Qld (1.8 per cent), SA (1.8 per cent) and WA (1.8 per cent) in trend terms.

However, although the amount of approvals rose as a whole, the result was largely due to an increase in the apartment segment, with the data showing that 11,513 unit approvals were made in July, the second-highest monthly number of unit approvals on record (just under the 11,572 approvals in May 2015).

Of these, the majority were in NSW, which saw unit approvals rise by 50 per cent.

Despite this increase, approvals for private sector houses fell by 0.5 per cent — or 0.6 per cent in seasonally-adjusted terms — due to reduced approval levels in SA (1.6 per cent), WA (1.5 per cent) and Vic (1.1 per cent). Private sector house approvals rose in Qld (0.8 per cent) and were flat in NSW.

While approvals in trend terms only rose marginally (0.2 per cent), the value of buildings approved rose 1.9 per cent in July, the seventh month in a row it has risen. This was largely attributable to non-residential buildings, which rose in value by 3.9 per cent. In comparison, residential building value rose by 0.9 per cent.

Figures “challenge RBA’s benign view of the housing market”

Cameron Kusher, head of research at data analyst CoreLogic, noted the increase in the number of approvals for units, commenting: "Over recent years, the number of units approved for construction monthly has quite often been larger than the number of houses approved...

"With supply having ramped-up so substantially, it becomes clear why there are concerns of a unit oversupply in certain locations of the major capital cities. No wonder APRA has recently confirmed that they are monitoring commercial lending (which includes lending for new housing development) closely for potential risks."

ANZ Research also highlighted that the figures show “an unexpectedly sharp increase in July and are once again around record levels”, adding: “Residential approvals rebounded strongly in July, more than offsetting the declines in the two prior months, and significantly exceeding expectations. At 21,000, monthly approvals are only marginally below the highest level on record, reached in May 2015.

“While we would caution against reading too much into what can be a very volatile series, the pick-up in both approvals and auction clearance rates challenges the RBA’s view that the risks of reigniting the housing market have eased, particularly with renewed strength in daily house prices in Sydney and Melbourne.”

ANZ Research also predicted that, combined with a record level of work still under construction, housing investment will continue to be a positive growth driver over coming quarters.

[Related: Increased housing supply cooling house prices: RBA]