An unexpected jump in building approval figures is more likely a pause in the housing slowdown rather than a turnaround.
Approvals for the construction of new homes rose 3.7 per cent in March, thanks to a strong 6.7 per cent bounce in the volatile apartment and townhouse segment. The figure beat market expectations of a 2.0 per cent fall.
Approvals for private sector houses rose 2.6 per cent, according to the Australian Bureau of Statistics.
However, Westpac senior economist Matthew Hassan says the stronger-than-expected result is unlikely to be sustained.
Total approvals were down 6.5 per cent in the year to March, and apartment and townhouse approvals fell 11.5 per cent in the same period, while approvals for private sector houses fell 0.2 per cent.
“Ex-high-rise measures point to a well-entrenched downturn in Western Australia, the start of a slowdown in NSW, but continued positive momentum in Victoria and Queensland,” Mr Hassan warned.
Mr Hassan said the earlier timing of Easter may have reduced the number of available working days in March and had the knock-on effect of reducing approvals.
“The underlying picture around approvals ex-high-rise is still looking relatively stable,” he said.
“So, it’s a slightly better picture. But, it’s still likely to be just a pause in an ongoing slowdown.”
JP Morgan economist Tom Kennedy noted the resilience of high-density approvals indicated the sector could be vulnerable in future.
“The Reserve Bank of Australia recently pointed to the high-density sector as a potential source of risk to financial stability in last month’s Financial Stability Review,” he added.
But Commonwealth Bank director of economics John Peters said that despite potential oversupply concerns, the data was positive for jobseekers and homebuyers.
“More supply may well help alleviate the housing affordability issue,” Mr Peters said in a note.
“The record construction phase through the first half of 2016 and beyond will continue to be an excellent generator of employment growth.”