As noted by Houses & Holes earlier today, the Australian Bureau of Statistics (ABS) has released the Building Approvals data for the month of August, which retraced some of the large falls of July (revised down from -17.3% to -21.2%), increasing by a seasonally-adjusted 6.4% over the month and beating consensus of 4.7% growth. In the 12 months to August, building approvals fell -15.4%:
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:
As you can see, dwelling approvals nationally were trending down since early 2010, but received a large boost from May when the number of unit & apartment approvals bounced. This unit and apartments surge was short lived, however, with unit & apartment approvals reversing in June and July before rebounding again in August.
Despite the recent bounce, dwelling approvals remain highly depressed relative to historical experience. The below chart, which shows approvals on a rolling annual basis, shows that approvals are tracking -8% below the long-run average. This is a particularly damning result when one considers that Australia’s population is around 40% bigger today than it was in the mid-1980s.
The below chart shows the time-series of approvals at the state level on a 3-month moving average basis:
While it’s not clear by the above chart, this month’s bounce in approvals was driven by Victoria (30% increase over the month), which experienced a large spike in unit & apartment approvals. Western Australia also registered a decent bounce (up 16% over the month), whereas New South Wales experienced a large fall (down -18% over the month).
Victoria continues to be the housing construction capital of Australia, accounting for around 35% of the nation’s approvals, compared with its 25% share of the population.
In light of ongoing weak new house sales, there’s not a lot of joy in this release for Australia’s home builders, nor the construction industry more generally, which appears to be entering recession (if not there already).
Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
