- Australian building approvals surged by the most in over five years in February.
- Total approvals to build attached dwellings jumped by a mammoth 64.6%. The vast majority were units approved in New South Wales and Victoria.
- Approvals to build houses continued to fall.
- Some economists have expressed doubts as to whether the apartment-led rebound will last.
Approvals to build new homes in Australia jumped sharply in February, surging by the most in over five years.
According to the Australian Bureau of Statistics (ABS), total approvals rose by a mammoth 19.1% after seasonal adjustments, logging the largest increase since September 2013.
Economists had been looking for a decline in approvals of 1.8%.
Helping to explain why economists got it so wrong, the entire increase was driven by a spectacular surge in attached housing approvals in February, largely units.
They jumped by 64.6% to 7,998 after seasonal adjustments, masking a 3.6% drop in approvals to build detached houses over the same period.
The sharp lift increase in the former was largely driven by Victoria and New South Wales, Australia’s most populous capital cities where high-rise residential construction has been prominent in recent years.
Without seasonal adjustments, approvals to build units in high rise development surged by 2,590 from a month earlier, or 123%. Permits to build townhouses also rose by 42% from January.
Despite the surge in attached housing approvals during the month, total approvals in this category were still down 9.1% from the same month a year earlier. So the bounce was massive but off a very low base.
Approvals to build detached homes also fell by 13.8% over the year, leaving total approvals down 12.5% from February last year.
Mirroring the steep rebound in total approvals, the value of residential work also jumped by 24.7% after adjusting for seasonality. Approvals for non-residential work also increased by 2.1%, leaving the total value of all building work up 15.4% from January.
While the bounce in February was impressive, given the lumpy nature of unit approvals — often found in large complexes — not everyone expects the recovery will last.
“It’s a surprising result, to say the least, but the apartment approvals data are very volatile,” said Kaixin Owyong, Economist at the National Australia Bank.
“We expect a reversal of this large spike next month and the trend for approvals to continue downward, alongside the ongoing deterioration in the housing market.”
That sentiment was shared by Matthew Hassan, Senior Economist at Westpac Bank.
“The headline rise should clearly be ignored –- Australia’s high-rise building boom is not about to reignite any time soon — with the key takeaway instead the more disappointing momentum evident in non-high-rise approvals,” he said.
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