Australia

March dwelling approvals increase; interest rates rise

AFTER two months of consecutive falls, the seasonally adjusted estimate for approved dwelling units rose by 15.3 per cent, with a total of 16,383 dwelling units approved in March, according to the Australian Bureau of Statistics (ABS).

The seasonally adjusted estimate for private sector houses approved increased by 0.5 per cent (to 9,779), the third rise in as many months. The seasonally adjusted estimate for approved 'private sector other dwellings' (such as apartments and semi-detached housing) rose by 59.9 per cent (to 4,558), following falls in the previous two months.

In terms of value, the seasonally adjusted estimate for the value of total building approved rose 4.8 per cent in March. The seasonally adjusted estimate for the value of new residential building increased 6.7 per cent while the value of residential alterations and additions increased 12.0 per cent. The seasonally adjusted estimate for the value of non-residential building increased 0.3 per cent.

New South Wales (+43.5%), South Australia (+24.4%), Victoria (+13.3%) and Western Australia (+8.2%) all experienced increases in the seasonally adjusted number of total dwelling units approved. Tasmania (-5.0%) and Queensland (-1.9%) experienced declines.

Housing Industry Association (HIA) Senior Economist Ben Phillips said the results were pleasing.  "The healthy state of building approvals reflects a stronger economy, record population growth, the Federal Government's social housing stimulus and the low interest rate environment through 2009," Mr Phillips said.

However, Mr Phillips said "even stronger numbers" are required to ease the housing shortage of nearly 200,000 estimated by the Federal Government's Housing Supply Council.

The increase in dwelling approvals came as the Reserve Bank of Australia (RBA) this week decided to lift interest rates. Effective 5 May 2010, the RBA raised the cash rate by 25 basis points to 4.5 per cent.

In his statement, RBA Governor, Glenn Stevens said the risk of serious economic contraction in Australia passed some time ago. He said "the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more." Mr Stevens said this week's decision meant that rates for most borrowers will be "around average levels."

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