The latest data on Australian building approvals for November 2024 reveals a complex picture of the housing market, with signs of an emerging upturn in multi-dwelling approvals despite overall monthly declines.
The total number of dwellings approved fell 3.6 per cent to 14,998 in November, following a 5.2 per cent rise in October.
Private sector houses saw a 1.7 per cent decrease in approvals, while private dwellings excluding houses experienced a more significant drop of 10.8 per cent.
Despite these monthly declines, the trend data indicates an improving trajectory for multi-dwelling units, with approvals 11 per cent higher than a year ago in trend terms.
The strengthening trend is most pronounced in Victoria, Queensland, Western Australia, and South Australia, states that have experienced substantial population growth over the past 12-18 months.
This growth is likely to support the increase in approvals, which is expected to translate into improved activity for the construction industry in these regions.
At the current trend rate of 15,000 dwelling approvals per month, the annualised rate of 180,000 new dwellings is approximately in line with the housing demand created by population growth.
However, this level of construction is unlikely to immediately address accumulated housing deficits, affordability issues, or homelessness.
Ivan Colhoun, CreditorWatch Consulting’s Chief Economist, notes that the emerging upturn in housing approvals without interest rate reductions suggests that any easing cycle in Australia this year may be relatively limited.
He adds that lower inflation and slower population growth still provide reasons to expect modest reductions in interest rates by the Reserve Bank of Australia.
The data also revealed a significant 18.4 per cent monthly increase in the value of non-residential construction approved.
While this series is notably volatile due to the nature of large commercial building projects, there appears to be a moderate upturn emerging in this sector as well.
As the housing market continues to evolve, upcoming economic indicators, including the Monthly CPI and Job Vacancies releases, will provide crucial updates on inflation and labour market trends.
These factors will play a significant role in shaping the RBA’s decisions on interest rates in the coming months.
