Australia’s building approvals drop modestly in August, but housing market remains strong

Building approvals in Australia dropped modestly in August following a huge jump in the previous month. The underlying tone continues to be quite strong. Monthly approvals remain around record levels, noted ANZ in a research note. Approvals in New South Wales continued to be around record levels, whereas volumes came in strong in both Queensland and Victoria.

The number of housing approvals, in terms of trend, continues to increase and is widely consistent with the peak of 2015. In the last 12 months, almost 240,000 residential buildings have received approvals across the nation. This will continue to feed into a considerable backlog of construction activity. Most of this growth has come from apartments, with high rises presently increasing in New South Wales.

The robust data reinforce the strength in other housing indicators. Both house price growth and auction clearance rates have rebounded recently, challenging the central bank’s view that the risks around the housing market have alleviated, said ANZ. Approvals for non-residential building declined sharply; however, earlier strength continues to point towards a slow trend recovery.

“The trend in approvals, combined with strength in auction results and house price growth, suggest to us that the housing market retains momentum”, added ANZ.