2015 saw a record 232,000 dwellings approved: Westpac's Matthew Hassan
GUEST OBSERVER
Dwelling approvals posted a better than expected rebound in Dec with a surprisingly strong rise in detached house approvals aiding an expected partial recovery in units from a big fall in Nov. Total approvals rose 9.2%, well above the consensus expectations of +4%. While approvals are still down 4.3% over the 2mths, the Dec detail was positive.
In particular, private detached house approvals posted a surprisingly strong 5.4% gain (+4.5%yr). This segment is typically more stable than total approvals and for most of 2015 was drifting lower at 0.6% a month. The gain accounted for the upside surprise vs expectations in Dec.
In contrast, the ‘other housing’ segment, i.e. units, posted a solid 12.8% rebound in line with expectations following the 22% slump in Nov (approvals down 6.5%yr). The detail shows a ‘modest’ partial rebound in high rise approvals (we estimate +12% in seasonally adjusted terms vs a 33% drop in Nov) with a slight gain in ‘low-mid-rise’ approvals. Interestingly, on a combined basis, detached housing and non-high rise units are now showing a reasonable uptrend running around +4% in annualised terms.
Looking by state, the bulk of the monthly volatility was in Vic which whipped around ±35% in Nov-Dec. Approvals posted a solid 2.1% gain in NSW, pulled back 4.6% in Qld (though following a strong gain in Nov) and jumped in WA (though still down 29%yr). The state detail on detached houses showed gains in all states with a very strong 13.9% surge in Qld. The latter suggests some of the Dec gain in total detached housing could be an anomaly (Qld accounted for 2.1ppts of the 5.4%mth surge).
The value of renovation approvals rose 3.5% in Dec to be up 11%yr, a reasonably solid uptrend in place albeit heavily concentrated in NSW where approvals recorded a big jump in Dec (+9.8%mth, +28.6%yr).
In stark contrast, the value of non res building approvals continues to bump around a weak level with unconvincing momentum. A 6.1% fall in Dec left approvals flat vs a year ago with quarterly results suggesting activity will pull back sharply once current projects start to wind down.
Looking at 2015 as a whole, the calendar year saw a record 232k dwellings approved, a 13.7% jump on 2014 and blitzing previous records (prior to 2014, the record high was 201k in 1973). For the first time ever there was virtually a 50:50 split between detached houses and unit approvals with the latter accounting for almost all of the growth in the year.
The Dec report showed a better than expected finish to the hear, also hinting at some residual momentum in non-high rise sectors holding the construction cycle up. More generally, the concentration of units and longer time required for these projects points to another significant leg higher in actual construction work before an eventual peak comes in late 2016.
Matthew Hassan is senior economist with Westpac.