A spike in the multi-unit sector has driven building approvals in Australia to a three year high.

A spike in the multi-unit sector has driven building approvals in Australia to a three year high.

On a seasonally adjusted basis, the overall number of dwelling units approved for construction throughout the country jumped 14.4 percent to come in at 16,318 – the highest level on record since March 2010 when approval levels were abnormally high amid a home owner rush to take advantage of a boost to federal incentives before these expired at the end of 2009.

Whilst the statistically volatile multi-unit sector led the way with a 31.8 percent spike to 7,780, approvals also rose 1.5 percent in the more stable stand-alone housing sector, indicating that whilst some of the rise may be an aberration brought about by a couple of large projects, a degree of underlying upward momentum remains evident.

HIA Senior Economist Shane Garret welcomed the latest figures, pointing out that seasonally adjusted approval numbers were up 8.0 percent over the September quarter and 19.3 percent compared with the same quarter in 2012, and that approvals over the past quarter had been running at an annualised rate of a whopping 180,000 per year.

But he cautioned that even though detached housing has been on the rise, the bulk of the momentum in the past three months has been focused around multi-units, and reiterated calls for further action to stimulate the sector including the release of more land.

“The main message from today’s figures is that the RBA’s interest rate cuts over the past two years are helping to support activity on the ground” Garrett says. “However, it is worth remembering that the growth in approvals is dominated by multi-units rather than houses. It would be a welcome development to see greater momentum emerge for detached housing.”

Australian Dwelling Unit Approvals

JP Morgan economist Tom Kennedy, meanwhile, cautions the numbers are being artificially inflated by a one-off gain in multi-residential building which will probably reverse next month, and that more data was needed before a general trend in that part of the market was determined.

In terms of states, New South Wales, Victoria and Queensland led the way, recording gains of 25.2 percent, 18.0 percent and 12.3 percent respectively, whilst approvals also rose 3.8 percent in Queensland and edged up 0.8 percent in South Australia.

Approvals number fell, however, in Tasmania (down 10.3 percent) and fell in trend terms by 4.3 percent in the Australian Capital Territory.

Approvals were virtually flat in the Northern Territory.

The latest figures follow earlier data yesterday showing new home sales at 27 month highs.