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Building approvals remain subdued but are beginning to edge higher following a slower pace of tightening from the RBA, says CBA.
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‘Green shoots emerging’ with building approval figures: CBA
11 January 2024
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9 minute read
Dwelling approvals rose 1.6 per cent in November in a sign of “green shoots” for the building industry after a 7.2 per cent increase in October, the Commonwealth Bank says.
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Economist Harry Ottley said CBA had predicted a negative figure and the surprise increase showed dwelling approvals had turned the corner despite being 4.6 per cent lower over the year.
“We had expected some statistical payback from last month’s big rise,” he said. The level remains subdued, especially on a per capita basis but there is clearer, albeit still modest upward trend now in place.”
“This is broadly in line with what we had expected given the pace of rate hikes slowed in 2023, dampening the handbrake on approvals.”
Mr Ottley said there are “some green shoots emerging” in the ABS data and an interest rate fall could drive a recovery.
“The slower pace of tightening from the RBA is likely supporting approvals from very low levels. If monetary policy is eased this year, approvals can increase more materially given there remains high underlying demand for new housing amid the current shortage.”
ABS head of construction statistics Daniel Rossi said approvals for private sector dwellings excluding houses increased 6.7 per cent, following a 17.4 per cent rise last October. Approvals for private sector houses fell 1.7 per cent, following a 2.9 per cent October increase.
Despite some comfort in the numbers, this financial year remained behind the equivalent period last year.
“In original terms, 70,900 dwellings were approved between July and November in 2023, compared with 81,954 over the same period in 2022,” said Mr Rossi.
Master Builders Australia chief economist Shane Garrett said the total number of approvals estimated for FY23–24 was expected to fall well below the government’s housing accord targets.
“Today’s figures mean that just 945,554 new homes have been approved across Australia over the past five years,” he said.
“Master Builders has forecast that 2023-24 will see around 170,100 new homes built, well below the 240,000 needed per year to meet the 1.2 million housing accord targets.”
Master Builders Australia deputy CEO Shaun Schmitke said with a new parliamentary year ahead, Master Builders would like to see government action on reducing the time and cost pressures around home building.
“We know the cost of living crisis is currently being exacerbated by stubborn inflationary impacts in housing,” said Mr Schmitke.
“Any decision taken by government needs to consider closely the impact it will have on the cost of doing business.”
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