High-rise resurgence offsetting slowdown in other housing segments: Westpac's Matthew Hassan

GUEST OBSERVER

Dwelling approvals were stronger than expected in April, posting a 3 percent rise against expectations of a 3 percent fall.

Approvals have risen 6 percent over the last 2mths with the monthly trend rate lifting back to 1.2 percent, an double-digit annualised pace.

However, the detail carries a strong warning that this renewed uptrend is unlikely to sustain and may be prone to a sharp reversal in coming months. 

All of the gain is coming from a resurgence in ‘high rise’ approvals, up an estimated 16% in April alone and nearly 40% since Feb (Westpac estimates of seasonally adjusted approvals).

That is unlikely to continue both in light of the segment’s typically ‘lumpy’ monthly profile and its exposure to investor activity – a segment currently coming under additional pressure from tightening lending conditions domestically and efforts to rein in non-resident purchases.

Meanwhile, other segments are looking much more subdued: private detached house approvals declined 2.3 percent mth and ‘low-mid-rise’ unit approvals posted a small rise but coming off a sharp fall in March (Westpac estimates of seasonally adjusted approvals).

The state detail shows the high rise increase was concentrated in NSW and Qld.

Ex high-rise, approvals are showing tentative signs of stabilising in NSW and WA and are continuing to track higher in Qld and Vic, giving a very mixed read on trends overall. 

The value of renovation and non res building approvals both posted strong gains in April, lifting trend growth into strong positive for renovations but just flat for non res building.

Overall, approvals continue to surprise to the upside but the detail is much less positive given the extent to which high rise approvals are driving gains.

Details 
Private houses  –2.3%mth, –8.9%yr      

Private 'units'    8.7%mth, 13%yr                       

NSW     10.4%mth, 18.8%yr  
Vic       –2.7%mth, –4.6%yr  
Qld       6.7%mth, 16.8%yr    
WA       –0.6%mth, –28.4%yr
SA        13.7%mth, 30%yr                  

Alteration & additions^   18.7%mth, 13.7%yr    
Non-residential^                         47.3%mth, 32.4%yr      
^ value      

Matthew Hassan is senior economist with Westpac.