Residential Construction Boom Keeps on Giving

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Wednesday, June 1st, 2016
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Australia’s residential construction upswing may well persist for a little longer, with building approvals showing renewed signs of life as apartment appetite remains strong.

Approvals for the construction of new homes rose three per cent in April, led by another strong 8.7 per cent jump in the volatile apartment and townhouse segment.

The headline figure defied market expectations of a three per cent pullback, and approvals were up 0.7 per cent over the 12 months to April.

“(It’s) another slice of evidence that the dwelling investment cycle still has some legs left, at least as far as developers’ appetites are concerned,” NAB Senior Economist David de Garis said.

“Interestingly, after flattening out over the past six to 12 months, the overall approvals trend is rising again.”

Royal Bank of Canada senior economist Su-Lin Ong said the results suggest the upswing may persist beyond her current forecast for some cooling to begin later this year.

JP Morgan economist Henry St John added that, if current election polling persists, more gains could be on the way.

“The combination of a lower cash rate and increased uncertainty surrounding the tax treatment of residential investments may represent further upside to approvals growth in the next two months,” he said.

However, ANZ economists said the current strength in approvals is unlikely to push much higher.

“Banks are increasingly cautious of lending to foreign investors, and concerns of emerging pockets of oversupply in some areas have seen banks tighten their lending criteria to developers,” they said.

The April surge in high density approvals was driven by the eastern seaboard states.

Multi approvals jumped by 20 per cent in Queensland, 19 per cent in NSW, and seven per cent in Victoria.

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