Australia’s housing approvals unexpectedly rise sharply in July

Housing approvals in Australia surprisingly rose sharply in July, driven by increase in New South Wales apartment permits. The building approvals rose at a record high pace of 11.3 percent in the month, much above market expectations. July’s number of approvals is just 0.7 percent below the all-time peak set in May 2015. July’s permits reached 21,000.

The robust increase in housing approvals was mainly driven by New South Wales. Most of the monthly rise was from the region’s apartment segment, which jumped 50 percent from the already high levels. Apartment approvals at both Queensland and Victorian continued to remain at about high levels, in spite of concerns of possible oversupply in inner-city Melbourne and Brisbane.

The July’s solid data challenges the Reserve Bank of Australia’s more benign view of the housing market. Even if the housing market segment is quite a volatile series, the recovery in both approvals and auction clearance rates challenges the central bank’s view that the risks of reigniting the housing market have eased, especially with renewed strength in daily house prices in Melbourne and Sydney, said ANZ in a research note.

Housing appears set to contribute to the GDP growth for some time. Along with a record level of work still in progress, the recent robustness in permits underpins the view that investment in housing would continue to be a major growth driver through the second half of 2016 and into 2017, added ANZ.

Meanwhile, non-residential building permits saw certain improvement. Approvals have trended upwards for the last five months throughout several sectors with the exception of industrial property.