‘Green shoots emerging’ with building approval figures: CBA
Building approvals remain subdued but are beginning to edge higher following a slower pace of tightening from the RBA, says CBA.
The total number of dwellings approved rose 1.6 per cent in November, in seasonally adjusted terms, following a 7.2 per cent increase in October, according to data released yesterday by the Australian Bureau of Statistics.
ABS head of construction statistics Daniel Rossi said approvals for private sector dwellings excluding houses increased 6.7 per cent, following a 17.4 per cent rise in October.
Approvals for private sector houses fell 1.7 per cent, following a 2.9 per cent October increase.
Despite the monthly increase, total dwellings approved were lower this financial year.
“In original terms, 70,900 dwellings were approved between July and November in 2023, compared with 81,954 over the same period in 2022,” said Mr Rossi.
Commonwealth Bank economist Harry Ottley said while approvals were 4.6 per cent lower over the year, this was still an upside surprise, with CBA predicting a negative figure for November.
“We had expected some statistical payback from last month’s big rise. The level remains subdued, especially on a per capita basis but there is clearer, albeit still modest upward trend now in place,” said Mr Ottley.
“This is broadly in line with what we had expected given the pace of rate hikes slowed in 2023, dampening the handbrake on approvals.”
Mr Ottley said there are “some green shoots emerging” with building approvals with the trend measure of approvals continuing to edge higher.
“The slower pace of tightening from the RBA is likely supporting approvals from very low levels. If monetary policy is eased this year, approvals can increase more materially given there remains high underlying demand for new housing amid the current shortage,” he said.
Master Builders Australia chief economist Shane Garrett said that despite the increase in approvals, the total number of approvals estimated for the 2023–34 financial year is expected to fall well below the government’s housing accord targets.
“Today’s figures mean that just 945,554 new homes have been approved across Australia over the past five years.
“Master Builders has forecast that 2023-24 will see around 170,100 new homes built, well below the 240,000 needed per year to meet the 1.2 million housing accord targets,” said Mr Garrett.
Master Builders Australia Deputy CEO Shaun Schmitke said with a new parliamentary year ahead, Master Builders would like to see government action on reducing the time and cost pressures around home building.
“We know the cost of living crisis is currently being exacerbated by stubborn inflationary impacts in housing,” said Mr Schmitke.
“Any decision taken by Government needs to consider closely the impact it will have on the cost of doing business.”
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