Summary: Home approval numbers up 4.0% in February, below expectations; 31.1% lower than February 2022; Westpac: figures still show clear slowdown; house approvals up 11.1%, apartments down 8.4%; non-residential approvals up 39.8% in dollar terms, residential alterations up 3.7%.
Building approvals for dwellings, that is apartments and houses, headed south after mid-2018. As an indicator of investor confidence, falling approvals had presented a worrying signal, not just for the building sector but for the overall economy. However, approval figures from late-2019 and the early months of 2020 painted a picture of a recovery taking place, even as late as April of that year. Subsequent months’ figures then trended sharply upwards before falling back in 2021 and 2022.
The Australian Bureau of Statistics has released the latest figures from February which show total residential approvals increased by 4.0% on a seasonally-adjusted basis. The rise was less than the 10.0% increase which had been generally expected and it contrasted with January’s 27.1% drop. However, total approvals still fell by 31.1% on an annual basis, down from the previous month’s figure of -8.1%. Monthly growth rates are often volatile.
“Looking through the choppy monthly profile, year-on-year figures still show a clear slowdown with approvals down over 30%,” said Westpac senior economist Matthew Hassan.
The figures were released on the same day as several other reports and Commonwealth Government bond yields generally rose modestly. By the close of business, the 3-year ACGB yield had gained 4bps to 2.95%, the 10-year yield had added 2bps to 3.32% while the 20-year yield finished 1bp higher at 3.74%.
In the cash futures market, expectations regarding future rate cuts softened. At the end of the day, contracts implied the cash rate would rise from the current rate of 3.57% to average 3.60% in April and then increase to an average of 3.655% through May. August 2023 contracts implied a 3.585% average cash rate while November 2023 contracts implied 3.495%, 7bps below the current cash rate.
Approvals for new houses rose by 11.1% over the month, a turnaround from January’s 13.3% fall. On a 12-month basis, house approvals were 13.6% lower than they were in February 2022, down from January’s comparable figure of -12.0%.
Apartment approval figures are usually a lot more volatile and February’s total fell by 8.4% after a 43.1% drop in January. The 12-month growth rate fell from January’s revised rate of -0.6% to -59.9%.
Non-residential approvals jumped by 39.8% in dollar terms over the month but were still 11.4% lower on an annual basis. Figures in this segment also tend to be rather volatile.
Residential alteration approvals increased by 3.7% in dollar terms over the month and were 5.8% higher than in February 2022.
