Housing recovery not confined to New South Wales and Western Australia: HIA
The May residential building approvals are suggesting that the recovery being seen in New South Wales and Western Australia is also prevalent elsewhere, except for the ACT, according to the Housing Industry Association.
With numbers easing back during the first part of 2014, May recorded a rebound with 16,425 dwellings approved – a 9.9% increase over the month following on from a subdued April. HIA economist Geordan Murray notes that this is closer to the peaks seen at the close of 2013 and very start of this year.
“The three consecutive months of declining approval numbers following the peak in January this year had caused some observers to start questioning the longevity of the home building recovery. This result gives us confidence that the recovery has a way to run yet,” said Murray.
“Residential building approvals reached a peak in January this year when over 17,700 dwelling approvals were recorded. To get to the record level in January it took a situation where all the ducks were sitting in a row – we had the five largest states all recording strong approval numbers at the same time.”
He said that volatility in multi-unit approvals has caused the January 2014 high not to re-appear, but that activity is expected to be strong across the year.
“The housing recovery, which was initially confined to New South Wales and Western Australia, appears to be gaining broader momentum. Approvals in the three months to May are markedly higher than the same time last year in all jurisdictions, ACT is the only exception,” he said.
Meanwhile Westpac senior economist Matthew Hassan has noted that the 9.9% jump has been largely driven by a sharp rise in units across New South Wales and Queensland, outstripping expectations. The consensus forecast, Hassan said, was a 3.2% “partial rebound”.
He said that the total approvals remain high by historical standards.
“Long run trends in population growth and household formation point to underlying demand for dwellings rising at around 172,000 a year. While approvals are now well above this level, new construction is still catching up following a decade in which additions to the dwelling stock have been persistently below this rate, often well below,” he said.
Private house and medium density approvals were notably firmer in Victoria and New South Wales, explained Hassan, while Queensland and Western Australia remained flat when looking at this metric.
However, is view remains that there may be a slowdown ahead in terms of the housing sector’s performance.
“Although the volatile 'units' component muddies the waters, at the margin the May dwelling approvals adds to evidence of a moderate slowdown across the housing sector. Earlier signs from consumer sentiment on 'time to buy a dwelling', auction clearance rates, monthly house price measures and housing finance approvals had suggested the cooling off might be more abrupt.
“Those indicators have shown a firmer tone over the last month though. A slowdown is still coming through but now looks to be more orderly.”
Construction-wise, including highrise projects, residential building is expected to remain on a rising trend through 2014.
Urban Taskforce, however, is concerned about May’s performance, with CEO Chris Johnson noting that it counts as a fall in approvals, particularly in the high density sector.
“Recent approvals have been strong in NSW so a correction is to be expected but the drop in higher density approvals is of concern. Major apartment projects generally come with large numbers of individual units but with low interest rates and significant off shore investment a fall in approvals was not expected,” said Johnson.
“Even more worrying is the value of approvals in the non-residential sector which has halved since December 2013. The value of NSW non-residential approvals in December 2013 was $1,005,113,000 but the May 2014 value of approvals has fallen to $543,083,000 which is almost half the figure five months ago.”