Australian dwelling approvals surprise higher in November: Westpac
Dwelling approvals continued to surprise to the upside in November, increasing by 11.7% compared to market expectations for a 1.0% decline.
November’s uplift was driven by a jump in Victorian approvals, up 38% on the back of a 21% rise in October.
The rest of Australia was relatively flat, down 2.0% in the month following October’s 8.3% drop.
On an annual basis, dwelling approvals are tracking at a 17.1% pace.
However, given the series is typically volatile, we prefer to assess the data on a rolling 3 month basis. Under that smoothed measure, approvals were up 3.8% in the month and 11.0% over the year but this is still partly inflated by base effects due to a dip in October 2016.
Looking at the dwelling type detail, the increase in Victoria was concentrated in private apartment approvals, in particular the high rise component (four or more storey blocks).
We caution that the high rise series is very volatile, and November’s surge likely reflects a lumpy project pipeline. This raises the risk of a sharp correction lower in apartment approvals in coming months even though Victoria continues to see strong population growth.
Nationwide, private apartment approvals rose 30.6%, mainly due to the aforementioned jump in Victoria but also because of gains in Queensland and WA on a much lower scale. On a rolling 3 month basis, Australian apartment approvals rose 8.8% in November and 21.3% over the year.
In regards to houses, detached dwellings were down 2% in November and relatively flat in yearly terms, +2.2%. By state, Queensland retraced past gains (-6.7%) but the trend is up over 2017, consistent with a resurgence in population growth.
Victoria too was down 1.1% though approvals have moved higher through the year. NSW detached dwelling approvals rose 2.6% in the month but are broadly flat over the year. WA continued to trend down, falling 8.7%.
The value of renovation approvals fell back 3.5% in November after increasing by 24.4% in October to be 17.8% higher in yearly terms. Mining states lifted through the second part of 2017 while Victoria held a high level.
The value of non-residential building approvals were broadly flat in November and up 35.5% over the year. However, after a choppy previous three months, total monthly approvals are relatively unchanged from April's level. State detail shows that much of the increase from last year is concentrated in Victoria and to a lesser extent NSW. By type, offices have been the main driver but warehouses and 'other' segments have also risen from last year.
Overall, the jump higher in Victorian high rise approvals raises the risk of a sharp fall in coming months. Yet, the firming trend in Victorian detached dwelling approvals is in line with stronger population growth. Momentum elsewhere in Australia looks to be limited.