Summary: Home approval numbers down 9.0% in November, below expectations; 15.1% lower than November 2021; dwelling approvals catching up with other indicators hit by rising rates; house approvals down 2.4%, apartments down 19.9%; non-residential approvals up 2.0% in dollar terms, residential alterations down 9.2%.
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 November which show total residential approvals fell by 9.0% on a seasonally-adjusted basis. The fall was lower than the flat result which had been generally expected as well as October’s -5.6%. Total approvals fell by 15.1% on an annual basis, below the previous month’s figure of -6.2%. Monthly growth rates are often volatile.
“In response to higher rates, housing lending has almost halved from its COVID peak. The same impact was not seen in building approvals through most of 2022,” said ANZ senior economist Adelaide Timbrell. “This has started to shift.”
Commonwealth Government bond yields fell on the day, especially at the short end of the yield curve. By the close of business, the 3-year ACGB yield had shed 14bps to 3.38%, the 10-year yield had lost 10bps to 3.74% while the 20-year yield finished 5bps lower at 4.11%.
In the cash futures market, expectations regarding future rate rises softened. At the end of the day, contracts implied the cash rate would rise from the current rate of 3.06% to average 3.21% in February and then increase to an average of 3.375% in March. May 2023 contracts implied a 3.595% average cash rate while August 2023 contracts implied 3.855%.
Approvals for new houses fell by 2.4% over the month after declining by 1.2% in October. On a 12-month basis, house approvals were 13.5% lower than they were in November 2021, down from October’s comparable figure of -12.1%.
Apartment approval figures are usually a lot more volatile and November’s total dropped by 19.9% after an 11.8% fall in October. The 12-month growth rate fell from October’s revised rate of +5.3% to -18.1%.
Non-residential approvals increased by 2.0% in dollar terms over the month and by 8.8% on an annual basis. Figures in this segment also tend to be rather volatile.
Residential alteration approvals decreased by 9.2% in dollar terms over the month and were 7.6% lower than in November 2021.
