The recovery in new home construction throughout Australia appears to be on a firm footing as new data shows another strong month of building approval readings.

But approvals remain below levels that are required to deliver upon national housing targets.

The Australian Bureau of Statistics has released the December monthly edition of its Building Approvals report.

According to the report, the seasonally adjusted number of dwellings that were approved for construction throughout the nation rose by 0.7 percent in December to come in at 15,174.

This represents the third highest level of monthly approvals since December 2022.

It provides further confirmation of a recovery in approvals which began to take hold from the early to middle part of last year.

Leading the way was the multi-unit sector (units, townhouses, apartments etc.), where approvals surged by 13 percent on account of a monthly surge in multi-unit approvals in New South Wales.

Whilst this segment of the market is statistically volatile, the latest month’s increase provides further confirmation of a broader trend which has seen a higher level of project flow since the middle of last year (see chart).

Meanwhile, approvals in detached house construction contracted by three percent and have eased back over the past three months.

In terms of states, approvals appear to be relatively healthy in Western Australia, Queensland and South Australia (see chart).

However, approvals have softened over recent months in Victoria and remain at subdued levels in that state after previously having been on an upward trend.

In New South Wales, approvals have been generally soft as housing construction markets in that state have been challenged by affordability constraints.

Whilst the state did see a jump in approvals in December, the increase occurred in the statistically volatile multi-unit segment of the market. Whether or not this indicates a broader underlying recovery in that state remains to be seen.

Whilst the upward trend in approvals is encouraging, approval numbers remain well below the 20,000 dwellings which need to be constructed monthly in order to achieve national housing targets of 1.2 million new home completions over the five years from 1 July 2024 under the National Housing Accord.

Housing Industry Association Economist Maurice Tapang welcomed the latest data but stressed that more needs to be done to meet affordable housing challenges.

“Residential building approvals in 2024 increased from the decade low seen in 2023 but were nowhere near the levels needed to meet underlying demand for housing,” Tapang said.

 

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