Housing Approvals

<p>ABS has today released the June data for housing approvals which shows that in NSW, the planning system approved 12.7% in less in June than was approved in May. The Council shut down for elections has started.</p>

<p>Urban Taskforce has warned the NSW Government that they faced a real risk that Councils would ease off on approvals in the lead up to what was to be the September elections.&nbsp; Today&rsquo;s data shows that the Government&rsquo;s light touch on Councils has resulted in precisely that.&nbsp; Worse, the Council elections have now been postponed till December and unless someone holds a blow-torch to the Councils and approval bodies, approvals will drop off further.&nbsp;</p>

<p>[smartcode_project:default project_id=31751]</p>

<p>Even prior to the lockdown, the productivity of the planning system had dropped off. Our economy cannot recover with this drop off in performance.&nbsp; Planning reform and approvals now will deliver a pipeline of work for when vaccinations allow our economy to fully re-open.&nbsp; There is an opportunity to catch up &ndash; but it seems that the planning system has slowed up again.</p>

<p>Urban Taskforce calls on the Government to immediately implement the recommendation of the NSW Productivity Commission White Paper.&nbsp; The GSC has set housing targets.&nbsp; It is up to the NSW Government to ensure that Councils meet them.&nbsp; Targets need to be regularly monitored against performance.&nbsp; There can be no excuse for Councils refusing to accept the targets.&nbsp; LGA Housing Strategies must come with sanctions for those Councils that selfishly refuse to contribute to housing supply, resulting in rising new home prices inflicted on those least able to afford them.</p>

<p>[smartcode_project:default project_id=30049 project_image_fid=162884]</p>

<p>The data shows that NSW housing approvals reached their peak in 2015/16 2016/17 and 2017/18 at around 73,000 approvals each year. Then, in the lead up to the NSW State election (2018/19) approvals dropped off to 58,000 and stayed low in 2019/20 with only 48,000, despite &ldquo;fast track&rdquo; schemes and a flurry of DPIE activity.</p>

<p>The total approvals have risen across all of NSW to 59,000 and this is welcome &ndash; but it remains well short of what is needed.&nbsp; The data reveals the problem.&nbsp; Apartment approvals across NSW have dropped significantly (most of these in Greater Sydney) while new separated house approvals have remained relatively flat.</p>

<p><img alt="" height="444" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/screen_shot_2021-08-07_at_2.19.12_am.png" width="1180" /></p>

<p>The table above, based on the ABS data, clearly shows that the price escalation is due to a drop off in housing approvals and this is flowing on to a drop off in housing supply.&nbsp;</p>

<p>Further, the time taken to navigate the NSW planning system, even after an approval has been granted, often takes years, adding to risk for the property development industry and additional costs for new home buyers.</p>

<p>The message went out to Councils in 2018 that the NSW Government was going to go soft on them after the Council amalgamation debacle.&nbsp; But the result has been a massive under supply of housing.&nbsp; This will only get worse unless Government can incentivise Councils to deliver an over-supply of new approvals.</p>


Council elections have now been postponed till December and unless someone holds a blow-torch to the Councils and approval bodies, approvals will drop off further. 

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ABS housing approvals data spells out why housing prices are going through the roof

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<p>Private sector house approvals jumped 6.1 per cent over November to reach their highest levels since 1999, figures released by the ABS found.</p>

<p>They've now soared by 40 per cent since June.</p>

<p>Daniel Rossi, director of construction statistics at the ABS, said that Federal and state housing stimulus measures and low interest rates have resulted in strong demand for detached dwellings.</p>

<p>There were 11,489 houses approved for building over November.</p>

<p>Queensland led the way in approvals, up 17 per cent, followed by Western Australia up 7.5 per cent.</p>

<p>South Australia saw 2.8 per cent more private sector houses approved, Victoria 1.5 per cent and New South Wales 0.7 per cent.</p>

<p><img alt="" height="1083" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/november_building_approvals.jpg" width="1200"></p>

<p>Total building approvals were up 2.6 per cent, beating economist forecasts of a two per cent rise.</p>

<p>Over October approvals rose 3.6 per cent.</p>

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There were 11,489 houses approved for building over November

Joel Robinson

Private sector house approvals reach highest levels since 1999

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<p>EXPERT OBSERVER</p>
<p>The CoreLogic home value index, covering the eight major capital cities, posted a robust 0.7% gain in November following a 0.2% rise in October and five consecutive monthly declines. The November rise was across all major capital cities. Prices are still 2.1% below their pre-COVID peak and 3.5% below the peak in late 2017.</p>
<p>The detail shows a broad-based strengthening in the November month. Notably the reopening in Melbourne has finally seen prices turn in the one major market still recording declines a month ago – the 0.7%mth gain surprisingly firm given turnover was still low. Other markets consolidated on previous gains with Adelaide and Perth, the smaller capital cities and regional areas leading the way.</p>
<p>Turnover nationally largely consolidated on its Q3 'pop'. The detail continues to show stark differences, activity in Melbourne only just moving off the extreme lows seen during lockdown but activity across other capital city markets still holding well above pre-COVID levels (and well above new listings suggesting these markets are likely to be very tight in coming months).</p>
<p>Sydney recorded a 0.4% gain to be up 0.3% on a 3mth basis. Units remain a notable weak spot, with prices in this segment down 0.7% in the November month and 1.8% on a 3mth basis, declines accelerating slightly, particularly at the top end of the market. Houses at the lower end of the market have seen the most promising gains.</p>
<p>Melbourne's 0.7% gain was across all segments and building types although prices have generally been firmer for lower priced parts of the market. Despite an apparent large overhang of stock in the inner city, unit prices also posted a solid rise in the month – perhaps a caution that some of the gain may be running off expectations rather than conditions on the ground.</p>
<p>Other markets remain markedly firmer. Prices rose 0.6% in Brisbane, 1.3% in Adelaide, and 1.1% in Perth. The smaller capital city markets also recorded strong gains – Hobart up 1.4% and both Canberra and Darwin up 1.9%. All of these cities except Perth now have prices above their pre-COVID peaks.</p>
<p>The housing market is now moving clear of COVID disruptions with recoveries at different stages across different jurisdictions but gaining momentum everywhere. While there will still be some weak areas, particularly in the Sydney and Melbourne unit markets, the resurgence in activity, the associated lift in market sentiment and more promising outlook for a vaccine remedy to emerge next year suggests broader momentum will remain well supported in 2021. We have recently marked up our price forecasts with a 4% gain now expected in 2021 and a 10% rise in 2022, essentially bringing forward our forecast for a 15% surge that was previously expected to begin in mid-2021.</p>
<p><strong>MATTHEW HASSAN </strong>is a Senior economist at Westpac</p>
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Australian dwelling prices lift: Matthew Hassan

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<p>EXPERT OBSERVER</p>
<p>Dwelling approvals came in below expectations with a 1.6% drop, weaker than both the consensus view of 0.0% and Westpac's view of a 2% gain. The fall comes after dwelling approvals surged in July by 12% from an 8yr low in June. Approvals are still tracking at subdued levels overall, with monthly approvals still down 14.6% vs December 2019.</p>
<p>The July result represented a catch-up, as approvals delayed by the initial nation wide lock-down were eventually processed by city councils. This raised the risk of an unwinding leading into August results.</p>
<p>Westpac's forecast noted uncertainty over varied COVID effects, with Victoria moving into a 'second wave' lockdown but other states continuing to re-open. Additionally, we saw support for approvals from the Federal government's HomeBuilder scheme – a stimulus programme that provides $25k grants to eligible owner-occupiers buying a new home (or renovating an existing home). The HIA reported a sharp jump in new home sales through June - August (+60% for the three months combined compared to the three months to May).</p>
<p>Private detached house approvals were supported by the scheme, posting a 4.8% increase which marked a 12.4% improvement on year.</p>
<p>The 11.1% fall in private unit approvals led the decline in August, with 'high rise' approvals down 11%, and 'low rise' unit approvals down 12%. This fall partially offset a 23% rise in July, with significant month-on-month volatility expected due to the bundling of unit approvals.</p>
<p>Across the states, NSW approvals continued a volatile trend, posting a decrease of 14.2% in August after approval delays contributed to a 32% increase in July. Tas (-26.2%) and SA (-4.8%) also declined. Gains were particularly strong in WA (+33.8%) and QLD (+8.1%), though broadly across the states approvals compared to a year ago.</p>
<p>As we expected, the impacts of the Vic lockdown beginning early August were not reflected in this release. The state posted a moderate increase of 1.8% due to the time lag, though impacts will surely be seen in coming months.</p>
<p>The value of alterations and additions to residential buildings reported a strong result of a 7% increase, the highest level recorded since April 2016. This segment is seeing support as the 'work from home' trend continues, and workers change their discretionary spending habits.</p>
<p>Large public projects in QLD and NT boosted the value of non residential building approvals by 40.7% in August. However, big double-digit swings in recent months continue to make discerning an underlying trend difficult.</p>
<p>In the near-term, there is the potential for another round of weakness - albeit concentrated in Victoria (which accounts for 35% of national approvals), which has been hit by the second lock-down. Other headwinds will challenge housing approvals into 2021, notable is the sharp slowing of population growth as net overseas migration plummets due to the closure of our international border.</p>
<p><strong>MATTHEW HASSAN </strong>is a Senior economist at Westpac</p>
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Dwelling approvals face weakness: Matthew Hassan

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<p>EXPERT OBSERVER</p>
<p>Dwelling approvals showed a further weakening in June broadly in line with Westpac’s forecasts but weaker than the consensus view. Total dwelling approvals fell 4.9% to be down nearly 20% over the last two months, touching an eight year low.</p>
<p>The detail showed weakness in the month was more broadly based than May’s unit driven fall. Private sector unit approvals declined 5.3%mth to be down 23.4%qtr for Q2 as a whole (our estimates suggesting 'high rise' down 27.8%qtr and 'low rise' down a much milder 6.2%qtr).</p>
<p>Private sector detached house approvals posted a similar sized 5.7% decline in the June month but were more resilient for the quarter as a whole, down just 2.6%qtr. On a monthly basis, all segments are down materially on a year ago.</p>
<p>All states recorded declines, although they were more pronounced in NSW (–14.8%), WA (–11.7%) and Qld (–10.9%), and more muted in SA (–4.6%) and Vic (–0.2%). All states have seen double digit declines over May-June.</p>
<p>The value of renovation approvals posted a relatively strong 11.4% surge in June. This may be an early sign that relaxing restrictions in May-June are seeing some improvement, given renovations are likely to have shorter lags between application and approval. However, it should be noted that the gain is coming after some large falls with June approvals still below their March level and the value still down 9%qtr for Q2 as a whole. The segment is likely also benefitting from expenditure switching as COVID restrictions limit discretionary spending in other areas.</p>
<p>The value of non res. building approvals also rebounded, rising 17.8%mth, but was also coming from a weak starting point, approvals still 6.6% below their March level and down a whopping 18.1%qtr for Q2 as a whole.</p>
<p>For dwellings, the pull back continues to track broadly in line with Westpac's forecast. We expect approvals to come in at 145k for the full calendar year, roughly in line with the annualised pace in the June month and implying further weakness over the second half of the year. Note that approvals are likely to understate weakness in building as work on many existing projects will be delayed and some approved projects will be shelved or slower to commence.</p>
<p>Against this, the Federal government's HomeBuilder scheme, which provides $25k grants to eligible owner-occupiers buying a new home (or renovating an existing home), will give some support in months to come. With COVID-19 disruptions becoming more uneven geographically, state approval numbers are also likely to see a widening divergence in the second half of the year, Qld, WA and SA well placed to rebound and respond to stimulus measures, NSW seeing a slower reopening and Vic still contending with a large 'second wave' outbreak.</p>
<p><strong>MATTHEW HASSAN </strong>is a Senior economist at Westpac</p>
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Dwelling approvals hit eight year low: Matthew Hassan

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<p>EXPERT OBSERVER</p>
<p>Dwelling approvals posted a much smaller than expected 0.2% dip in Dec, following a sharp 10.9% jump in November. The Consensus had been looking for a 5% pull back. Annual growth lifted to 2.7%yr, the first positive since June 2018, albeit with monthly comparisons flattered by base effects. Measured on a quarterly basis, Q4 saw a 6.1%qtr rise but approvals still down 8.3%yr.</p>
<p>As noted in our preview, the previous month's gain was heavily concentrated in NSW, which posted a 50%+ rise, approvals ex NSW down 0.9%. We attributed much of this to a delayed effect associated with regulatory changes rolled out in October with December expected to see the spike reverse.</p>
<p><img src="https://www.urban.com.au/images/2020/2/4/Dwelling%20Approvals%20CL%20JAN.JPG" alt=""></p>
<p>The December detail confirmed this with a sharp reversal in NSW (–30%mth) but the impact was negated by an even sharper high-rise-driven spike in Vic (+34%mth). Our initial take is that this is again largely a temporary effect relating to the lumpy high rise project pipeline. That said, Vic is showing a decent lift in non high rise approvals as well that may be an early sign that the wider market upturn is starting to flow through to non high rise segments.</p>
<p>Outside of NSW and Vic, approvals across the rest of Australia fell 3.6%mth on a combined basis and are tracking a much weaker profile. For the December month, approvals fell 5.7% in Qld, slumped 20% in SA but rose 5.4% in WA.</p>
<p>The segment breakdown nationally showed an estimated 11% pull back in high rise approvals which followed a 40% jump in Nov. 'Low-mid' rise approvals surged strongly, up an estimated 19% in the month and 22%yr. Private house approvals dipped 0.1%mth to be down 7.1%yr. On a combined basis, non high rise approvals were up 4.1%mth but still down 0.8%yr.</p>
<p>Renovation approvals continued to fall sharply into year end, the total value of approvals down further 1.8% in December to be down 5.5% for Q4 as a whole – the fastest pace of decline since 2016.</p>
<p>Non residential building approvals pared back some of their recent weakness, jumping 35% in the month but still down 17.5% for Q4 as a whole – the segment can be extremely volatile month to month but has moved into a fairly clear downtrend since August.</p>
<p>Overall the December update shows a complex mix with one off factors likely again exaggerating strength but some hints of firming elsewhere. As always, housing-related data should be treated with extra caution through the December-January period as seasonality can amplify volatility. On balance we continue to expect approvals to show a muted and slow response to rate cuts with a gradual lift in non high rise approvals coming through more strongly by mid-2020 (overlaid with a slightly boost from bushfire-related rebuilding) but high rise holding broadly flat. While the monthly profile for total approvals may be shaping into a sharper turning point the detail suggests the underlying cycle is turning more slowly. Either way, its likely to be a few more months before we get a clear read.</p>
<p><strong>MATTHEW HASSAN </strong>is a Senior economist at Westpac</p>
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Have dwelling approvals reached a turning point? Matthew Hassan

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<p>EXPERT OBSERVER</p>
<p>The Australian Bureau of Statistics data on housing approvals for September 2019 indicates that they are lower than in June 2013.</p>
<p>The continuing drop in dwelling approvals in New South Wales is a big worry for the housing industry and needs to be addressed by government urgently.</p>
<p>The September dwelling approvals were 3,670 which is a drop of 46 percent since the high point of 6,744 approvals in July 2016. We are now at the level of approvals of June 2013 when there were 3,777 new dwelling approvals.</p>
<p>NSW is now below Victoria’s home approvals, which has a smaller population, yet their September home approvals were 4,247 compared to the NSW approvals of 3,670.</p>
<p>The major drop in housing approvals has been in apartments where only 1,617 approvals occurred in September 2019, compared to 2,490 as recently as April 2019, and 3,882 two years ago in September 2017. This represents a 58 percent drop in higher density approvals over a two-year period.</p>
<p>We are aware of some developers having to lay off staff due to the downturn and this will flow on to the builders and their supply chain. The NSW Government must be concerned about the impact of the housing downturn on jobs.</p>
<p>The good news in the ABS data indicates a big jump in non-residential building approvals in September 2019 with $1,570,637,000 value of the approvals which is the highest amount ever in New South Wales.</p>
<p>The continuing drop in dwelling approvals in NSW must be reversed by government policy supporting a simpler planning system. The NSW Productivity Commission recently stated that planning approvals in NSW took twice as long as in other states. Clearly the slow and complex planning system must be streamlined to help support the supply of new housing for the state’s growing population.</p>
<p>The Urban Taskforce urges the NSW Government to develop a more streamlined process for ho<span>using supply particularly for large projects where local infrastructure can be funded by the project.</span></p>
<p><em><strong>CHRIS JOHNSON </strong>is the CEO of Urban Taskforce</em></p>
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NSW housing approvals the lowest since 2013: Chris Johnson

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<p>Dwelling approvals fell 3.9 per cent in August, according to figures released by the ABS.</p>
<p>It's the 21st consecutive month approvals have fallen.</p>
<p><span>"The fall continues to be driven by private dwellings excluding houses, which decreased by 9.2 per cent in August," said Daniel Rossi, director of construction statistics at the ABS. </span></p>
<p><span>"Private sector houses also fell, by one per cent."</span></p>
<p><span>Every state saw dwelling approvals decline over the month.</span></p>
<p>To enlarge, <a href="https://www.propertyobserver.com.au/images/2019/10/1/August%20dwelling%20approvals.jpg" target="_blank">click here</a>.</p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/10/1/August%20dwelling%20approvals.jpg" alt=""></span></p>
<p><span>The Australian Capital Territory saw the biggest decrease in dwelling approvals across August, down -27.7 per cent.</span></p>
<p><span>The Northern Territory (-8.7 per cent), New South Wales</span> (-5.4 per cent), Victoria (-4.0 per cent), Queensland (-2.3 per cent), South Australia (-0.9 per cent), Tasmania (-0.4 per cent) and Western Australia (-0.2 per cent) all saw declines.</p>
<p><span><span>"The value of non-residential building approved has risen for 12 months, to a record high of $4.8 billion," Rossi said.</span></span></p>
<p><span><span>"The rise in August was driven by approvals for health buildings in New South Wales."</span></span></p>
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Dwelling approvals fall again in August

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<p><span>New data from the Australian Bureau of Statistics shows NSW apartment approvals fall by 33% over the last year, says the Urban Taskforce.</span></p>
<p><span>The apartment market in NSW is slowing rapidly, according to the latest data, says Urban</span><span>Taskforce CEO Chris Johnson. ‘A year ago apartment approvals were 3,021 for </span><span>December 2017, but the December 2018 figures indicate a drop of 994 to a total of 2027 apartments. This is a fall of 33 percent in a year, and it is likely that the fall in approvals wil l</span><span>continue.’</span></p>
<p><span>Victoria is ahead of NSW in apartment approvals over the last quarter, with 15,472 approvals compared to NSW’s 14185 approvals. Victoria’s population is 20% smaller than </span><span>NSW so approvals would generally be 20 percent lower, however they are ahead by 9 percent.</span></p>
<p><span>The decline in apartment approvals in NSW is influenced by many factors, including the Royal Banking Commission, tighter lending restrictions, uncertainty around housing policy due to the upcoming state and federal elections, declining house prices and anti- development rhetoric driven by campaigning politicians.</span></p>
<p><span>These factors undermine confidence in new housing construction. Whoever wins the </span><span>state government election in March should look to implement new housing policies to encourage the supply of homes and ensure that jobs and investment in the property </span><span>sector is maintained.</span></p>
<p><span>The Urban Taskforce is keen to work with all political parties to develop policies that can </span><span>deliver sufficient housing </span><span>supply to accommodate Sydney’s growth in the coming years.</span></p>
<p><span>The graph below are based on the Australian Bureau of Statistics data.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/2/5/housing%20approvals.jpg" target="_blank">Click here</a> to enlarge:</p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/2/5/housing%20approvals.jpg" alt=""></span></p>
<p> </p>
<p>Source: Urban Taskforce</p>
<p><span><em><span>CHRIS JOHNSON</span> is the Urban Taskforce CEO.</em></span></p>
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Alarming decline in housing approvals no longer can be ignored: Chris Johnson

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<div class="column">EXPERT OBSERVER</div>
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<div class="column">Council approvals to build new homes fell by 5.0 per cent in April after rising by an upwardly- revised 3.5 per cent rise in March (previously +2.6 per cent). Over the year, building approvals fell from a record high $126.7 billion in March to $126.2 billion in April.</div>
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<div class="column">House approvals rose by 0.7 per cent and were up by 11.3 per cent over the year to April, the strongest annual growth rate in over three years.</div>
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<div class="column">Click here <a href="https://www.propertyobserver.com.au/images/2018/5/30/houses.jpg" target="_blank">to enlarge.</a>
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<div class="column"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/5/30/houses.jpg" alt=""></div>
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<div class="column">In April, council approvals are at record highs for Melbourne (62,160 units) and Adelaide (10,759 units) and at 61⁄2-year highs for Hobart (1,346 units) in rolling annual terms.</div>
<div class="column"> </div>
<div class="column">The approvals data has implications for banks, retailers, developers, building and building material companies.</div>
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<div class="column"><strong>What does it all mean?</strong></div>
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<div class="column">All eyes will be on Friday’s May update on Australian home prices. The housing market is rebalancing. Sydney dwelling prices are likely to have fallen for the ninth consecutive month and Melbourne prices have probably fallen for a sixth month in-a-row.Why are home prices falling? Overseas’ buyer demand is slowing, bank lending standards have been tightened, housing credit is slowing and there is a greater supply of houses available for sale, as evidenced by softer auction clearance rates.</div>
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<div class="column">So it is no surprise that overall council building approvals continue to fall. That said, the much-discussed slowdown in approvals for detached houses has failed to materialise. In fact, annual approvals for houses are at the highest level since October 2014.</div>
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<div class="column">Strong population growth, low vacancy rates and a still-strong preference for Aussies to own their castles is supportive of residential construction.</div>
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<div class="column">A quick sample of the capital cities reaffirms this view. Building approvals on a rolling 12-month annual basis are at record highs in Melbourne and Adelaide. Hobart approvals are the highest in almost seven years (82 months).</div>
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<div class="column">The building pipeline continues to expand. And this is before government-sponsored infrastructure projects are added to the total.</div>
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<div class="column">Construction companies are already claiming they can’t find the staff they need. There will be upward pressure on wages. The question is how much of the wage pressure will spill over to other areas</div>
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<div class="column"><strong>What do the figures show?</strong></div>
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<p><strong>Building Approvals</strong></p>
<p>Council approvals to build new homes fell by 5.0 per cent in April after rising by an upwardly-revised 3.5 per cent rise in March (previously +2.6 per cent). House approvals rose by 0.7 per cent and were up by 11.3 per cent over the year to April, the strongest annual growth rate in over three years.</p>
<p>Apartment approvals fell by 11.6 per cent.</p>
<p>In trend terms, overall approvals fell by 0.1 per cent. But trend house approvals rose by 0.9 per cent, the 15th consecutive monthly increase.</p>
<p><strong>Over the past year 227,900 new homes were approved</strong> – a 13-month high but down from the record high of 242,775 in the year to August 2016.</p>
<p><strong>Dwelling approvals across states/territories in April</strong>: NSW (+5.1 per cent); Victoria (-8.4 per cent); Queensland (+1.2 per cent); South Australia (+4.2 per cent); Western Australia (+21.0 per cent); Tasmania (+6.0 per cent). Trend terms: Northern Territory (+6.7 per cent); ACT (+14.8 per cent).</p>
<p>The <strong>value of all commercial and residential building approvals</strong> fell by 4.2 per cent in April and are down by 4.8 per cent on the year. Residential approvals fell by 4.3 per cent; new building was down 4.8 per cent; and alterations &amp; additions fell by 0.3 per cent. Commercial building fell by 4.0 per cent in April after falling by 5.3 per cent in March.</p>
<p>Over the year, building approvals fell from a record high $126.7 billion in March to $126.2 billion in April. Annual commercial building approvals stand at $47.4 billion in April, down from a record high $48.3 billion in March.</p>
<p><strong>What is the importance of the economic data?</strong></p>
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<p><span>The Bureau of Statistics' monthly </span><span>Building Approvals </span><span>release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. </span><span>Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. </span><span>An increase in approvals would point to stronger future activity for construction-related companies. </span></p>
<p><span>What are the implications for interest rates and investors?</span></p>
<p>Building approvals have declined from their peaks in August 2016, but approvals for houses are the strongest in annual terms in over three years.</p>
<p>But will these houses actually get built? That will largely depend on land availability. State governments, like New South Wales, have been selling off both land plots and state-owned housing across Sydney suburbs, raising revenue amid a decline in stamp duty receipts.</p>
<p>Strong population growth is supporting council approvals in Melbourne and Hobart. In a sign that the South Australian economy is picking-up, Adelaide approvals are at record highs on rolling annual basis.</p>
<p>The solid pipeline of residential and commercial building implies that the construction sector will continue to be a key driver of the Aussie economy in 2018/19. Rising building costs and strong job ads growth for engineers and construction workers suggests that inflationary pressures are building.</p>
<p>CommSec expects no change to official interest rates until early 2019. The extremely slow lift in wage and goods price growth suggests the first rate hike in the new cycle won’t occur until next year.</p>
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<p>Ryan Felsman is a senior economist at CommSec.</p>
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