Dwelling approvals retrace in February

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By Leith van Onselen

The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of February. At the national level, the number of dwelling approvals fell by a seasonally adjusted 3.2% to 18,768. The overall fall was driven by the volatile unit and apartment segment, which fell by 6.0% in February. By contrast, the more stable house approvals segment was relatively flat, falling by just 0.1% over the month.

The result beat analysts’ expectations, who had expected a 4% fall in approvals over the month.

In the year to February 2015, dwelling approvals rose by a seasonally-adjusted 14.3%, with strong growth in unit approvals (+36.2%) more than offsetting a small fall in house approvals (-1.0%):

ScreenHunter_6844 Apr. 01 11.38
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A chart showing the time series of seasonally-adjusted dwelling approvals at the national level is provided below, split-out by detached houses and units & apartments:

ScreenHunter_6845 Apr. 01 11.47

As shown above, dwelling approvals have gotten a second wind over the past five months.

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There were a record 205,930 approvals in the year to February 2015, with unit & apartments surging ahead and detached house approvals merely running just above the 30-year average (see next chart).

ScreenHunter_6846 Apr. 01 11.49

However, approvals remain unremarkable in population-adjusted terms, given that Australia’s population has grown by more than 45% over the past 30-years (see next chart).

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ScreenHunter_6317 Mar. 03 11.52

The below chart shows the time-series of approvals at the state level on a rolling annual basis:

ScreenHunter_6848 Apr. 01 11.52
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As you can see, dwelling approvals have experienced a strong second wind in Victoria, have flattened-out in New South Wales after a strong run, have risen sharply in Queensland, are weakening in Western Australia, and remain subdued in South Australia.

The next few month’s approvals data continue to be vital as it will confirm whether the mini construction boom is peaking, pointing to a potential weakening of housing construction activity in 2015 just as the mining investment cliff intensifies, or whether it has much further to run.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.