After falling 6.6% in January, Australian building approvals rose a stronger than expected 3.1% in seasonally adjusted terms during February.
As has become recent custom, the overall increase, and strength in building approvals more broadly, was driven by apartment approvals, which rose 7.6% during the month.
Houses, on the other hand, fell 1.2% during the month.
Worth noting is that even though the seasonally adjusted data rose, the overall trend in building approvals fell 0.5 per cent in February “and has fallen for 11 months”, the ABS said.
Recently we learnt that some off-the-plan prices are collapsing in Melbourne. So the run up in apartment approvals in February suggests the more recent approvals might qualify as “slower builders”.
Luci Ellis, the RBA’s head of its Financial Stability Department, said (our emphasis):
Stock–flow dynamics are central to property market developments, as we have long known. The actors in that market know that, too. But just as there’s a Greater Fool Theory of investment that helps perpetuate booms in prices of financial assets, it sometimes seems that there is a Slower Builder Theory of property development, where everyone knows that not all the projects underway will make money, but yours will if you can just complete it before the other guys complete theirs. This coordination failure can end in painful busts in building activity, because the boom went beyond underlying demand.
That’s something both developers and buyers might need to ponder.