Summary: Home approval numbers down 3.6% in November, fall greater than expected; 3.2% higher than November 2023; Westpac: report mildly disappointing; ACGB yields rise modestly; rate-cut expectations soften; Westpac: 1.5% rate of additions to dwelling stock coming off 75-year lows; house approvals down 2.2%, apartments down 5.6%; non-residential approvals up 18.4% in dollar terms, residential alterations up 0.3%.
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 through 2021, 2022 and 2023.
The Australian Bureau of Statistics has released the latest figures for November and they indicate total residential approvals decreased by 3.6% over the month on a seasonally-adjusted basis. The fall was a greater one the 1.0% decline which had been generally expected and in contrast with October’s 5.2% rise after revisions. Total approvals rose by 3.2% on an annual basis, down from the previous month’s revised figure of 6.8%. Monthly growth rates are often volatile.
“Overall, the November batch of approvals data was mildly disappointing, casting doubt on the modest upturn that formed through most of 2024,” said Westpac senior economist Matthew Hassan.
Commonwealth Government bond yields rose modestly across the curve on the day. By the close of business, the 3-year ACGB yield had gained 2bps to 3.93% while 10-year and 20-year yields both finished 1bp higher at 4.51% and 4.90% respectively.
Expectations regarding rate cuts in the next twelve months softened slightly, although a February cut is still currently viewed as a solid chance. Cash futures contracts implied an average of 4.275% in February, 3.98% in May and 3.78% in August. December contracts implied 3.63%, 71bps less than the current cash rate.
“Annual growth is holding in the 5-6% range, a solid but unspectacular lift from what was a very low starting point; the 164,000 dwellings approved over the twelve months to June 2024 compares to a 10-year average of 203,000 and a 20-year average of 185,000, “Hassan added. “At just 1.5% of existing dwellings, the rate of additions to the dwelling stock is coming off 75-year lows.”
Approvals for new houses decreased by 2.2% over the month, up from October’s 3.8% fall after revisions. On a 12-month basis, house approvals were 4.0% higher than they were in November 2023, slightly lower than the previous month’s comparable figure of 4.1%.
Apartment approval figures are usually a lot more volatile and November’s approvals for this category fell by 5.6%, in contrast with October’s 22.3% rise. The 12-month growth rate slowed from October’s revised rate of 11.2% to 2.0%.
Non-residential approvals rose by 18.4% in dollar terms over the month and by 19.1% on an annual basis. Figures in this segment also tend to be rather volatile.
Residential alteration approvals rose by 0.3% in dollar terms over the month and were 5.9% higher than in November 2023.
