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The latest Building Approvals data for October 2023 released by the Australian Bureau of Statistics (ABS) has revealed an increase of 7.5 per cent in the total number of dwellings approved in seasonally adjusted terms, up from the 4.0 per cent decrease recorded in September.
For private sector house approvals, the seasonally adjusted estimate rose 2.2 per cent after a 4.7 per cent drop in September while private sector dwellings excluding houses approved increased 19.5 per cent following a September fall of 3.4 per cent.
The ABS found mixed results for total dwelling approvals on a state-by-state basis, with Western Australia (11 per cent), Queensland (10.7 per cent), and NSW (9.6 per cent) showing increases while South Australia (7.2 per cent) and Victoria (1.4 per cent) posted falls.
Additionally, the value of total buildings approved rose 6.7 per cent following the 5.3 per cent decrease in September.
Total residential building values rose 7 per cent, made up an 8.9 per cent increase in new residential building and a 3.2 per cent drop in alterations and additions.
ABS head of construction statistics Daniel Rossi noted that despite these increases, “total dwellings approved have been low this financial year.”
“In original terms, 55,029 dwellings were approved between July and October in 2023, compared with 65,599 over the same period in 2022,” Mr Rossi said.
Westpac senior economist Matthew Hassan said that the detail to the October update was “less convincing” than the headline rise.
“To the extent that unit ‘noise’ is the main driver of this month’s gain we will likely see a reversal in November,” Mr Hassan said.
“Outside of this, the picture still looks to be of approvals, bouncing around at weak levels, with only slight hints of a very gradual uptrend.”
Housing Industry Association (HIA) senior economist Tom Devitt noted that new house building approvals increased by 1.2 per cent during October, leaving house approvals over the last three months “down by 11.2 per cent compared to the same quarter last year and around its lowest levels of the decade”.
“Australian home builders had a significant pipeline of work under or awaiting construction when the RBA started increasing interest rates in May 2022,” Mr Devitt said.
“This pipeline has kept Australians employed and the economy going for over a year, obscuring the impact of the sharpest rate hiking cycle in a generation.
“This pipeline is now shrinking and in 2024 home builders will be starting construction on fewer new houses than at any time in the last decade.”
Mr Devitt stated that this was pre-empted as lending indicators such as home sales, housing finance, building approvals, and consumer confidence have been “depressed all year”.
“The problem is the Reserve Bank of Australia (RBA) has been impatient in wanting to see progress in its lagging indicators, namely a rise in unemployment and a faster decline in inflation,” Mr Devitt added.
“With home building pipelines now shrinking, 2024 will be the year that these lagging indicators start to reflect the full impact of what the RBA has done over the last year and a half.”
He further noted that the RBA’s rate hikes will continue to suppress home building and spending across the broader economy next year by “much more than would have been necessary to get inflation over the line into the RBA’s 2–3 per cent target range.”
[RELATED: November property prices hit record highs]
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