The number of homes approved to be built has hit an all-time high, helped by a surge in apartments and townhouses.
Approvals for the construction of new homes rose 7.5 per cent in November, which easily beat economists’ expectations of a three per cent fall.
There were 18,245 approvals granted, the highest monthly result since records began in the 1980s. Approvals for private sector houses dipped 0.3 per cent in the month, while the ‘other dwellings’ category, which includes apartment blocks and townhouses, surged 16.7 per cent.
National Australia Bank senior economist Spiros Papadopoulos said the solid outcome indicated a strong pipeline of construction activity ahead.
On the downside, all that activity is occurring in the apartment sector. Adding to those concerns is the fact that most of the apartment growth is occurring in Victoria, where there is already an oversupply of apartments in some areas.
“The RBA has been quite open about its concerns around the Sydney and Melbourne market and we have seen some easing of the apartment growth in NSW but the Victorian market has re-accelerated,” Mr Papadopoulos said.
“With interest rates at these fairly low levels, you’d expect the prices to hold up fairly well in the short term but once we start to see interest rates go up, you’d be quite concerned about prices in a couple of years’ time, with that huge supply coming on stream in 12 to 18 months.
“It certainly keeps Victoria on the radar for the RBA.” JP Morgan economist Tom Kennedy said the data was encouraging given there were some worrying indications signalling a loss of momentum in the housing sector in late 2014.
“We think the cash rate is going to remain around these levels for quite some time, so you’re getting attractive funding rates, which should be supportive for residential construction,” he said. However he doesn’t think the data is strong enough to change interest rate forecasts.
“We don’t think this data is a game changer, most of the upside was in high residential approvals, so I wouldn’t be surprised if there will be some payback the following month,” Mr Kennedy said.
During the 12 months to November, building approvals were up 10.1 per cent, the Australian Bureau of Statistics said on Thursday. AAP