Building approvals down 1.2% in Victoria: ABS

Dwelling approvals decreased 1.2% in Victoria, the only state where approvals fell over July, according to the Australian Bureau of Statistics.

Dwelling approvals increased in July 12.6% in the Australian Capital Territory,4% in the Northern Territory, 3.1% in Western Australia, 1.6% in Tasmania, 1.5% in South Australia, 0.6% in New South Wales and 0.1% in Queensland.

Across the country there was a 0.9% increase in the total number of dwelling units approved.

The number of private sector house building approvals rose 1.1% in July.

Private sector house approvals fell for the second month in Victoria, down 1.0% in July.

JP Morgan economist Ben Jarman told AAP there was a rebound in approvals for both the detached houses and higher density homes categories.

"I don't think there is anyone who is doubting that building approvals are trending up, the question is how sustainable is it?", he said.

"We're reasonably upbeat about what building approvals can do this year. In fact, we think they will be adding more to growth than they have in the last few quarters.

"The question is will they offset what we're seeing elsewhere, which is a fair bit of weakness."

Michael Workman from the Commonwealth Bank of Australia points out that the actual number of residential building approvals jumped 10.8% in July - 28.3% higher than a year ago and well above market expecations of 4%.

The rise was mainly driven by multi-unit dwellings which rose 24.4% to be 62.5% higher over the past year.

Approvals for detached houses rose 3.9% - now 12% higher than last year.

"Note that the volatile multi?unit segment rose by 24%, with most of it in Victoria’s approvals. It means that Melbourne’s apartment market is most probably headed for, or already in, oversupply," Workman says.

"Melbourne’s inner?city apartment prices are rising more slowly than for detached dwellings. Victoria’s strong population growth, near 100k per annum, will help restore a more balanced outcome in the next few years. On a national level, the relatively firm population growth is producing underlying dwelling demand, on our estimates, of around 170 to 180k."

Peter Jones from Master Builders Australia Residential says while building approvals are back into positive territory they still have a way to go. 

“But they are still nowhere near where they need to be to meet the under supply of housing,” Jones says.

“With the Election less than a week away both major parties need to build on this positive trend with their policies.

“The 10.8% increase seasonally adjusted for July brings building approvals back on track after two consecutive falls

“It’s a positive sign that a sustained housing recovery may be taking hold

“Strengthening the building and construction sector with the right policy settings will help kickstart the economy, increase productivity, drive a stronger building industry and more jobs."