Building Approvals Record Biggest Drop in 21 Years

Approvals for detached house builds plunged 16.1 per cent in September, the biggest drop in more than two decades, as the tailwinds of HomeBuilder start to dissipate.

But a high volume of unit approvals in New South Wales has bolstered the apartment figures, signalling investor activity in the market.

The Australian Bureau of Statistics data for September showed that while approvals fell 4.3 per cent across all dwelling types, the number of dwellings approved over the past 12 months is at a three-year high, and 4.9 per cent below the all-time high.

ANZ senior economist Adelaide Trimbell said house approval rates in September were more similar to pre-Covid levels as the pull-forward effect of HomeBuilder stimulus packages was ameliorated.

“Investors in NSW drove the growth in unit approvals in September, growing by 27.2 per cent month-on-month, while all other state unit approvals fell,” Trimbell said.

“National unit approvals increased by 18.1 per cent month-on-month in September and are 47.2 per cent higher than last year.

“Unit approvals are likely to continue to rise while investor lending is strong, though rising interest rates, particularly fixed rates, may curb residential investor demand.”

Commsec senior economist Ryan Felsman said council approvals of new dwellings have declined five of the past six months.

“[This is] due to the unwind of HomeBuilder stimulus-related housing activity and Delta virus lockdown disruptions,” he said.

“Approvals to build detached houses dropped 16.1 per cent in September, the biggest monthly decline in 21 years.

“But higher-density apartment approvals lifted 17.4 per cent. Approvals for detached houses plunged by 19.3 per cent in Greater Melbourne and by 8.4 per cent in Greater Sydney in September.

“However, approvals for dwellings excluding houses soared 114 per cent in Greater Sydney to a four-year high of 3291 units.”

Felsman said building construction was expected to remain elevated over the next 12 months due to strong home buyer demand.

BIS Oxford Economics economist Maree Kilroy said the dramatic drop in approvals was solely driven by the downturn in detached house approvals.

“The apartment sector looks to have firmly surpassed the trough in approval terms,” Kilroy said.

“Despite the weaker house result, search and enquiry indexes for new homes, along with greenfield land sales, have remained elevated.

“The underlying weight of demand appears sufficiently strong that the post HomeBuilder lull is expected to be modest at the national level.”