As the new year begins, there are encouraging signs for Australia’s construction industry as new data confirms an upward trend in residential building approvals.

On a seasonally adjusted basis, data from the Australian Bureau of Statistics indicates that the number of dwellings that were approved for construction throughout Australia came in at 14,998 in November.

But approvals remain well below levels which are needed in order to deliver upon national housing targets.

Whilst this is down by 3.2 percent compared with October, it represents the second highest reading of approvals since May 2023 (see chart).

As such, the results provide further signs that a recovery in new home building is taking hold.

In terms of sectors, the data shows that momentum is finally taking hold in the multi-unit sector (units, townhouses, apartments etc.).

Having previously lagged detached home building in terms of the recovery, approvals in multi-unit dwellings have now been on an upward trend from a low base since March last year (see chart).

Meanwhile, approvals in detached home building have now been on an upward trend since May 2023 (see chart).

On a statewide basis, meanwhile (major states only), the data shows that approvals are healthy in Western Australia and South Australia and are trending upward in Queensland and Victoria.

However, approvals remain soft in New South Wales (see chart) – a phenomenon which underscores warnings by Housing Industry Association (HIA) late last year that levels of home building were increasing ‘everywhere but Sydney’.

(source: Australian Bureau of Statistics)

HIA Senior Economist Matt King welcomed the data.

King said that the improvement was being driven by ongoing elevated levels of population growth (notwithstanding that the rate of population growth has eased) and a welcome degree of certainty for consumers as November 2024 marked the passing of one year since the Reserve Bank of Australia last increased official interest rates.

“Following a period of prolonged weakness, there are signs of life again in building approvals, which is pointing to a nascent recovery in new home building,” King said.

Whilst the latest data is encouraging, however, building approvals remain well below levels which are required to meet national housing targets of delivering 1.2 million new homes over the five years from 1 July 2024.

To achieve this goal, the nation would need to build 20,000 homes per month – well above the 15,000 homes that were approved in November.

 

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