Dwelling approvals post stronger than expected rise in Feb: Matthew Hassan
GUEST OBSERVER
Dwelling approvals posted a stronger than expected 8.3 percent rise in Feb.
Westpac and the consensus view had been for a modest 1-1.5 percent decline.
Approvals are still 13.5 percent below their Aug peak in trend terms.
Notably the latest monthly gain looks to be more than just high rise related volatility with all segments recording robust increases.
Private detached house approvals rose 5.3 percent/mth. Our estimates suggest high rise approvals were up about 15 percent/mth in seasonally adjusted terms with 'low rise' approvals up about 10 percent/mth.
The high rise/non high rise mix is of particular interest at the moment as it shapes the extent to which the slowdown impacts construction activity in 2017 vs 2018 and beyond.
The rise in non high rise approvals pares back some of the near term weakness that was showing through in approvals over recent months.
The state breakdown shows particularly strong monthly gains in NSW (+20 percent) and Qld (+34 percent). Both states saw a more pronounced weakening in approvals through the second half of last year. Other states all saw significant declines.
The value of renovation approvals rose 14 percent, a partial rebound from a 19 percent fall in Jan. Approvals remain on a solid uptrend led by strong gains in NSW and Vic with activity flat/weakening elsewhere.
The value of non res building approvals jumped 35 percent but are extremely volatile month to month. Trend-wise, approvals are still tracking lower at a modest annual pace.
Overall, the strong rise in dwelling approvals in NSW and Qld this month casts some doubt over the Feb gain, particularly given the more pronounced weakness in these states in preceding months.
Approvals may be being buffetted by 'non market' factors, e.g. council mergers may have impacted approval processing in NSW while recent changes to state government policies targetting construction may have influenced activity in Qld.
Matthew Hassan is senior economist with Westpac.