Dwelling approvals rise 27.3 per cent in May 2012

THE number of dwellings approved rose 27.3 per cent in May 2012, in seasonally adjusted terms, following a downwardly revised fall of 7.6 per cent in April, according to figures released last week by the Australian Bureau of Statistics (ABS).

Dwelling approvals increased in Victoria (31.8 per cent), New South Wales (25.1 per cent), Western Australia (24.8 per cent), South Australia (16.2 per cent) and Queensland (10.3 per cent) but decreased in Tasmania (-12.1 per cent), in seasonally adjusted terms.

In seasonally adjusted terms, approvals for private sector houses rose 8.7 per cent in May. Private sector house approvals rose in South Australia (16.5 per cent), Western Australia (13.2 per cent), Queensland (12.3 per cent), Victoria (6.5 per cent) and New South Wales (3.0 per cent).

The value of total building approved rose 43.4 per cent in May, in seasonally adjusted terms, after falling for 3 months. The value of residential building rose 26.8 per cent, while non-residential building rose 71.0 per cent.

The ABS said the large increase in dwelling approvals in May was driven by a number of large private sector projects in New South Wales, Victoria and the Australian Capital Territory.

It also said the statistics for Western Australia in recent months may have been impacted by the WA Building Act 2011, which came into effect on 2 April 2012.

The Housing Industry Association (HIA) said the strong increase in building approvals was a rare piece of positive news for the new home building sector.

"Building approvals were up by a sizeable 27.3 per cent in May 2012. This result provides some hope of an improved new home building outlook emerging in time and delivers preliminary evidence that recent interest rate cuts may be starting to have an impact," said HIA Senior Economist, Andrew Harvey.

"Key factors behind the strong May result include a partial rebound in Western Australia which saw approvals up by 24.8 per cent in May after a 47.2 per cent fall in April, along with a similar rebound in South Australia," Mr Harvey said.

"There is also a 'bring forward' effect in both Victoria and NSW where buyers have rushed into the housing market to secure state government home buyer incentives before they end on 30 June 2012," Mr Harvey said.

According to the HIA, multi-unit approvals rose by 58.3 per cent in May 2012 to be up by 41.5 per cent on May 2011, while detached housing approvals were up by 9.0 per cent in May 2012, but down by 8.5 per cent when compared to May 2011.

Peter Jones, Chief Economist for Master Builders Australia, said the May figures were a welcome relief for the housing industry, adding that it is too early to confirm the results as the beginning of a sustained recovery.

"Despite the positive signs, it is too early to declare the industry on the recovery path from what has been a prolonged period of downturn. Key forward indicators remain down and the multi-unit sector is notoriously volatile," Mr Jones said.

Mr Jones concluded that further easing of monetary policy is required to further boost confidence and encourage a return of new home buyers into the market.

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