Aussie Building Apps Rose Again At Year-End

Aussie Building Apps Rose Again At Year-End

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Residential building approvals rose a respectable 2.2%m/m in December (J.P. Morgan -1.5%, consensus 0.0%), after a significant jump in November. Private sector building approvals were up for both houses and ‘other’ (i.e. higher density) dwellings. Approvals for houses nearly reversed the previous month’s fall, pushing up 3% over the month, while the other dwellings category increased a further 9%, after vaulting 35% in the previous month.

Relative to September levels (which immediately preceded the phasing down of the first home buyers’ (FHBs’) grant), new approvals for houses gained a further 6%m/m in the final month of the quarter, though the momentum of activity within this category is certainly slowing, with October marking the peak for the 2009 year. The tripling of the FHBs’ grant in October 2008 to A$21,000 for the purchase of new dwellings was certainly the driving force behind improved building activity in houses over the year.

With 4Q marking the final hurrah for the expanded grant, which expired on December 31, it is not surprising to see activity returning to more subdued levels. Private survey data has revealed a similar dynamic unfolding in monthly house prices. These series imply that monthly house price growth generally slowed over the quarter, in sync with the RBA’s three consecutive rate hikes, implying that activity might not have been as uniformly strong as suggested by the remarkable 5.2%q/q increase in house prices announced earlier this week by the ABS.

Approvals for higher density dwellings increased a solid 9% over December. Given the volatility of this series, however, it is difficult to associate any particular month’s improvement with a strengthening in housing market conditions. Indeed, over the year, total approvals fell 22% relative to 2008. Private survey data released at the end of 2009 showed that prices for apartments had significantly outperformed houses over 2009, indicating that there has been no lack of demand for higher density dwellings. Rather, it appears that the weakness of this category has been driven by difficulties in financing these larger scale projects.

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The value of building approved fell in December, entirely due to weaker approvals for non-residential building (down 9%). Again, as in the last few months, the footprint of the diminishing profile of total government infrastructure projects in the health and education sectors dragged down this category.

ENDS

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