'A LOT OF WORK TO COME': The outlook for Australian housing construction has suddenly brightened

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  • Australian building approvals rebounded strongly in June, completely reversing an ugly plunge recorded one month earlier.
  • Approvals for housing and non-housing dwellings increased by 5% and 7.2% respectively after seasonal adjustments.
  • While approvals for residential building rose strongly, the value of non-residential approvals fell sharply during the month.

Australian building approvals rebounded strongly in June, completely reversing an ugly plunge recorded one month earlier.

According to the Australian Bureau of Statistics (ABS), total approvals rebounded by 6.4% to 19,133 last month in seasonally adjusted terms, leaving them up 1.3% over the past year.

The improvement was broad-based with private sector housing and non-housing dwelling approvals rising during the month.

After seasonal adjustments, private sector housing approvals jumped 5% to 10,127, leaving the increase from a year earlier at 2.1%.

This largely reversed an ugly 7.4% plunge recorded in May that looked unusually weak at the time.

Private-sector non-housing dwelling approvals — largely units — rose at an even faster pace, lifting by 7.2% in seasonally adjusted terms to 8,786.

Compared to a year earlier, that represented an increase of 0.9%.

Mirroring the increase in total dwelling approvals, the ABS said the value of residential building approved in June rose by 1.8% in seasonally adjusted terms.

However, that was more than offset by a large decline in the value of non-residential building which fell by 7%, leaving the total value of approvals in June down 1.2%.

Despite the softness in the value of non-residential approvals, Gareth Aird, Senior Economist at the Commonwealth Bank, says today’s data suggests fears of a sharp decline in residential activity appear to be overdone.

“The housing market has cooled from a prices and credit growth perspective, but in terms of construction, which contributes to economic activity, things remain buoyant,” he says.

“On the basis that most of the approvals for houses and apartments turn into commencements, the level of dwelling investment will remain elevated in Australia over the next two years.”

Underpinning that view, Aird says total approvals on a rolling annual basis currently sit at 231,000, higher than the 222,000 level seen in the prior 12 months.

“This means that there is a significant pipeline of residential construction to come, and it means that on our numbers dwelling investment will likely add to GDP growth over 2018/19,” he says.

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