Australian dwelling approvals above expectations: Matthew Hassan

GUEST OBSERVATION

The March dwelling approvals report came in above expectations with approvals rising 2.8% v market and Westpac expectations of a 2% dip.

The context here is important – approvals surged 25% in the final three months of 2014 and have broadly held on to these gains in early 2015 with moves of +0.3% in January, –1.6% in February and now +2.8% in March.

Although small, the March rise takes approvals to a new record high that, if sustained for another 11 months would see annual approvals at 233,000 – that compares to approvals of 210,000 over the last 12 months which is already well above the previous recorded peak of 201,000 in 1973 (more recent peaks have topped out at around 180,000).

The main driver of recent strength has been in NSW and VIC units where large high-rise projects have been key. This presented a potential downside risk to monthly approvals if a ‘gap’ in the project pipeline emerged.

This clearly did not occur in Mar with private sector unit approvals posting a robust 5.3% month rise. An initial glance at the detail suggests high rise was again the main driver.

The other detail was a touch better than expected. Private sector detached house approvals were up 1.1% after a five months run of flat results and despite construction related finance approvals showing signs of flattening out.

The state detail shows a modest firming in NSW and VIC is offsetting weakness elsewhere.

The value of renovation approvals fell back in March and is flat on a year ago. The value of non-residential approvals was up but is bouncing round a low level, down 20% year on year.

Matthew Hassan is senior economist with Westpac.