Data relating to new housing construction in Australia continues to stabilise in what appears to be encouraging news for the nation's home building sector.

The Australian Bureau of Statistics has released its October monthly data for building approvals and lending indicators.

On a seasonally adjusted basis, the approval data revealed that the number of dwellings that were approved for construction throughout Australia increased by 7.5 percent in October to come in at 14,223.

To be sure, most of the increase was driven by a 19.5 percent surge in the statistically volatile multi-unit residential sector (units, townhouses and apartments). Approvals in this sector are volatile, meaning that caution should be observed when interpreting a single month of data.

Encouragingly, however, approvals in the more statistically stable detached house sector increased by 2.2 percent.

Meanwhile, lending data indicates that the seasonally adjusted number of new loans that were approved to owner occupiers for the purpose of either constructing a new home or purchasing a newly constructed home edged up by 1.8 percent in to come in at 4,385.

The latest data provides further confirmation of a stabilisation in the market for new home construction throughout Australia which has taken hold approvals and construction lending bottomed out in February (see charts).

This follows an extremely soft period for new home approval and construction lending which occurred in the second half of 2022 on account of the aggressive cycle of monetary policy tightening which has been undertaken by the Reserve Bank of Australia.

Whilst the stabilisation is welcome, Housing Industry Association says it expects the number of dwelling construction starts to continue to contract before bottoming out in the September quarter of 2024.

The latest data comes as the Reserve Bank of Australia elected to hold interest rates steady at its December board meeting.

In a statement accompanying the decision, Reserve Bank Governor Michelle Bullock said that inflation was continuing to moderate and that any further tightening of monetary policy would depend on data and an evolving assessment of risks.

The data also comes amid growing doubts about whether or not the National Housing Target of delivering 1.2 million new homes by 2024/25 will be achieved.

To meet this target, the nation would need to complete an annual average of 240,000 new dwellings each year over the five years beginning in 2024/25.

In its forecasts, ACIF says it expects annual housing completions of only 169,000 in 2024/25 rising to 184,000 completions by 2027/28.

 

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