The recovery in Australia’s home building industry continues to gather momentum, with the latest data suggesting that building approvals have hit a two-year high.

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 increased by 6.3 percent in January to come in at 16,579.

This represents the highest approval numbers since December 2022.

Leading the way is the multi-unit sector (units, townhouses, apartments etc.), where seasonally adjusted approvals surged by 12.7 percent.

This was driven by a 68 percent surge in multi-unit approvals in New South Wales – something which came on top of an earlier 35.0 percent surge in NSW multi-unit approvals in December.

Approvals in detached house construction also edged up by 1.1 percent.

Granted, it should be noted that multi-unit approvals are statistically volatile and are often influenced by the approval or otherwise of one or more large apartment complexes.

Nevertheless, multi-unit approvals have been on a sustained upward trend since March last year (see chart).

In detached housing, approvals have eased back over recent months following a period of upward momentum over across 2023/24.

CreditorWatch Chief Economist Ivan Colhouun broadly welcomed the result.

“As usually happens, approvals began their cyclical upswing ahead of the first reduction in interest rates by the RBA,” Colhoun said.

“Unusually, house approvals have softened in recent months, likely reflecting some overhang of stock, with the CPI reporting discounting of newly constructed homes.

“It’s (the recovery in approvals) helpful medium-term for the construction sector, which has been experiencing high insolvency rates, that approvals are recovering.

“But (it) would be more helpful if house approvals were also recovering.”