Apartment development driving dwelling approvals

The Australian Bureau of Statistics (ABS) released its monthly dwelling approval data. The total number of dwellings approved was up 4.2 per cent in October, to a total of 15,498.

HIA economist Maurice Tapang said that this is the largest number approved in nearly two years. According to ABS head of construction statistics, Daniel Rossi, figures were driven largely by apartment development.

“The overall rise this month was driven by an increase in apartment developments approved in New South Wales and Victoria, with private dwellings excluding houses rising 24.8 per cent,” Tapang said.

“Meanwhile, private sector house approvals fell by 5.2 per cent in October, after reaching a two-year high in September.”

Back in September, total dwelling numbers increased by 5.8 per cent, highlighting subdued growth in October. The drop in private sector house approvals contrasts that of a 4.1 per cent rise in September.

Despite this, the yearly statistics showed a rise across the board. Total dwelling approvals are up 6.1 per cent from October 2023. Meanwhile, private sector houses are up 2.4 per cent and private sector dwellings excluding houses are up 7.1 per cent.

NSW carried the proportion of dwelling approvals by a significant margin. Across the state, the number of total dwelling approvals rose 34.8 per cent.

In comparison, Victoria climbed 8.9 per cent and Tasmania 3.9 per cent. On the other hand, Queensland, Western Australia, and South Australia dropped 14.1 per cent, 11.9 per cent, and 0.3 per cent, respectively.

The value of total buildings approved witnessed a drop, too, falling 3.7 per cent to $13.21 billion. Broken down, the value of residential buildings jumped 3.2 per cent to $8.33 billion, comprised of a 4.4 per cent increase in new residential building to $7.21 billion and a 4.2 per cent fall in alterations and additions to $1.12 billion.

The stabilisation of interest rates was recognised as a large driver of continued increases in building approvals.

“It has been more than a year since the RBA last raised interest rates. Unchanged interest rate settings has provided some degree of certainty for consumers,” said Tapang.

“Households are returning to new home building despite there being no cut to the cash rate. This is because unemployment remains at very low levels, while housing demand remains very strong.”

Off the back of this release, Indeed’s APAC economist Callam Pickering is adamant that a recovering housing market puts any rate cut off the table for the time being.

“A recovering household sector puts the nail in the coffin of a near-term rate cut. The combination of strong employment, improving retail growth and high underlying inflation is simply incompatible with cutting rates,” he said.

“Our view is that the RBA will maintain a tightening bias until they see sufficient progress with regards to service sector inflation and a considerable pick-up in productivity growth. Not enough progress has been made on that front for the RBA to be confident in their ability to a) return to their 2–3 per cent inflation target and more importantly b) stay there.

“And recent strength in retail spending, which could put upward pressure on retail prices, suggests that we are no closer to achieving that.”

Related: National new home sales continue upward trend

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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