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Today’s release of Building Approvals in January has surprised the markets with a seasonally adjusted 7.9% increase (against expectations of a 1.8% decline). In addition previous months have been revised sharply higher. The seasonally adjusted annual growth figure is now 9.1%, slightly weaker than the 9.6% rate of Dec (although this was revised from +8.8%). Unit approvals, as usual, have a highly confusing effect on the data and this month we see unit approvals up 1447 (or +17.5% m/m); house approvals actually fell slightly (-0.4% m/m).
However, when we consider the Trend series (as we should) we see a 1.3% m/m increase and 5.0% growth over a year ago; this compares to growth of 3.3% for the year to Dec (revised up from 2.1%).
The scale of volatility in the seasonally adjusted data can be seen in relief when we consider the Queensland data. Here we see an unbelievable 47.8% increase for the month and a 50.8% jump over the year. These exceptional numbers are all down to unit approvals. In Queensland we saw an extra 1564 unit approvals (up 103.2% m/m!); these approvals alone more than account for all the increase seen nationally over the month. House approvals were up just 63 (+3.3% m/m). Again, the Trend should be our friend here. Trend approvals in Queensland were up 2.6% m/m (and Dec revised to +2.8% from +0.8%) and +8.0% yr/yr (from +1.4% in Dec which was revised from -5.7%).
Whichever way you look at it, these are significantly stronger numbers than anticipated; especially for Queensland which had been going through a relatively weak patch for the construction sector. Time will tell if this is merely a statistical glitch or whether we are finally starting to see house building in Queensland strongly recover.
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March 3rd, 2015 at 11:22 am
[…] The massive surge in apartment and townhouse approvals in January reported by the ABS today (chart below) is welcome news for the Queensland building industry and people looking to buy or rent an apartment in inner city Brisbane, where much of the development is likely to occur. At the same time, some developers may be concerned about the number of apartment developments there will be competing for buyers, and the implications for the prices of apartments. I expect the supply boost will severely constrain the growth of apartment prices, but I note that consultancy firm Urbis and other commentators last month were more optimistic, arguing the expected supply boost was catch up growth and prices would continue to increase (see New hotspot for Brisbane apartment development). Pete Faulkner has a nice summary of today’s data in his post Queensland leads a building approvals surge: […]
March 3rd, 2015 at 11:36 am
Pete, the data appear unbelievable but I suspect they’re accurate as they’re based on counts of development approvals made by Councils. There isn’t the sampling error problem as with the labour force survey. That said, they may not be sustainable, particularly given many of the developments might turn out to be bad investments ex post. We’ll wait and see.
March 3rd, 2015 at 9:27 pm
Gene, agree. When I said “unbelievable” I probably should have said “seemingly unbelievable”! Cheers.