New building approvals have jumped by an impressive 6.4 per cent from May to June, exceeding expectations and dampening any worries about tighter credit.
June saw 19,133 new dwelling approvals, up from 17,979 in the previous month, representing a much higher increase than the expected 1 per cent growth.
In terms of the types of dwellings receiving approval, townhouses and semi-detached houses increased by 8.9per cent, while detached houses received an increased approval rate 4.4 per cent.
The June figures represent a pleasant surprise for many in the industry, with both single-family and high-density dwelling approvals posting higher-than-anticipated gains.
Is the trend indicative of a turning tide in the housing industry?
It is important to recognise that figures from month to month can be erratic and influenced by the timing of one or two individual projects. Overall, the trend for new builds along the eastern seaboard is stalling, demonstrating a slight hesitation in developers seeking out new projects. However, these reservations are seemingly starting to let up this year, as longer-run figures are reflecting a similar growth trend as that represented by the monthly figures.
June signals that the industry is back on track
While May was a very low-key month for new dwelling approvals, June’s figures have reassured the market that building approvals remain stable. Indeed, the Housing Industry Association lobby group recently released a statement stating that new detached homes sales increased in June for the first time this year, demonstrating that the situation within the industry is looking up.
Of course, approvals do not guarantee that dwellings will start being built, with the time-lag between approval and construction seeing an average increase recently due to the sheer supply of approved residential projects, the high proportion of high-density projects, and financial constraints. What’s more, as site values fall, it seems a strong possibility that some developers will take countercyclical action to prepare permits for the next credit upturn.
Are the strong figures all they’re cracked up to be?
Some housing industry professionals have attempted to calm the hype surrounding June’s high figures, with some forecasting a more modest set of approval volumes throughout the rest of year. Indeed, building approvals for apartments, for example, are seeing a decline and are contributing to a slow downward overall trend.
However, over the year up to June, approvals of new units, townhouses and semi-detached houses increased by 2.6 per cent to 108,382, representing the highest number of approvals since April 2017 after 19 months of declining figures. For detached houses, the picture is even brighter as the segment has seen less drastic dips, rising over the year to June to reach 122,339, the highest number in 14 years. This represents an increase in approvals of 5.3 per cent, as well as representing the seventh straight month of growth over the 12 months. This could be interesting news for private lenders and non-bank lenders, as it remains to be seen whether home loans may keep up with the somewhat optimistic rise of new building approvals.