- Posted By Koala Invest
The housing pipeline picked up in July as new home approvals jumped more than expected. There was a surge in detached dwellings and apartments as improving consumer sentiment made the monthly total climb at its fastest pace in five months.
New dwelling approvals rose 12 per cent from June to 13,840 in seasonally adjusted terms, Australian Bureau of Statistics figures showed on Tuesday.
Approvals of detached dwellings, which account for about two-thirds of the total rose 8 per cent to 8952 and attached dwellings – apartments, townhouses and semi-detached homes – jumped 20 per cent, the first monthly gain in five months, to 4888.
Monthly figures are volatile, as totals can vary greatly according to the date on which approvals are stamped, but the figure still was higher than the 2 per cent improvement that NAB economists had expected following the easing of the first wave of COVID-19 restrictions across much of the country.
"The July results likely reflect improved consumer sentiment in May, on the back of falling COVID-19 cases and easing of restrictions," said Daniel Rossi, director of construction statistics at the ABS.
The new housing pipeline is still shrinking.
Over the year to July, new home approvals totalled 171,965, a 5.7 per cent contraction on the same period a year earlier.
However, the pace of decline has eased from the 22.1 per cent year-on-year contraction seen in October, suggesting a recovery is underway.
Caution is still necessary, as these latest figures do not yet show the effect of the severe second wave of restrictions on Victoria's development industry or the consumer confidence that is necessary to drive demand for new homes.
Over the 12 months to July, Victoria accounted for 60,866, or 35 per cent, of the national total.
Melbourne is the housing market most closely tied to immigration. With population growth expected to slow to a crawl and the state economy facing a long period of recovery from the second wave of infections – that most recent figures show has 2620 active cases and 565 deaths – it will hit the overall housing economy.
"The July results precede the second Melbourne lockdown, which will act as the main drag on national dwelling demand in the coming months," BIS Oxford Economics economist Maree Kilroy said.
“The restrictions are expected to hinder Victoria’s response to the stimulus measures currently in play, including record low interest rates and the HomeBuilder program."
In July, Victoria chalked up a seasonally adjusted 9.3 per cent gain in new home approvals to 5064.
NSW had the best month, with a 32 per cent jump in total approvals reflecting the state's 14 per cent jump in houses and a 64 per cent leap in attached dwellings.
Over the 12 months to July, NSW accounted for 47,587, or 28 per cent, of national approvals.
Queensland reported a 7.7 per cent monthly increase as the 17 per cent gain in detached houses more than offset the 8.7 per cent monthly decline in attached homes.
Approvals in the much smaller SA were down 10.5 per cent on both types of housing.
WA, despite the recent signs of a surge in demand for new housing on the back of pent-up demand and generous stimulus payments, suffered a further decline in approvals in July.
Detached homes ticked down 0.7 per cent – reflecting the slip from 888 house approvals to 882 - and attached home approvals nearly halved to 83 from 164 in June.
"While the uptake of housing stimulus measures in other states has been promising, many headwinds persist, including a difficult labour market and very weak population growth," Ms Kilroy said.
Separately, the value of non‑residential approvals fell by 19.8 per cent from June, to the lowest value since January 2018.
"This is no surprise as businesses have shown a reluctance to invest due to the uncertain economic outlook," CBA Economists Belinda Allen and Nicolas Guesnon said.
"There is a preference for liquidity, business credit growth has weakened, as have investment plans. Uncertainty about the types of space required in the future will also be holding back development plans, particularly around office, hospitality and accommodation space."