Approvals for the construction of new homes rose by a surprisingly strong 19.1 per cent in February, but economists quickly warned against reading much into a spike driven by a big rise in apartments and townhouses.
Approvals for private sector houses fell 3.6 per cent in the month, but seasonally adjusted data released on Tuesday by the Australian Bureau of Statistics showed the “other dwellings” category, which includes apartment blocks and townhouses, soaring 64.6 per cent.
Despite the second straight monthly improvement, total building approvals over the 12 months to February were still down 12.5 per cent.
The monthly jump in overall approvals was largely driven by Victoria’s 37.3 per cent increase and NSW’s 25.2 per cent. It followed a shock fall of 18.3 per cent in the year to November 2018 (announced in January).
BIS Oxford Economics economist Maree Kilroy acknowledged the surprising strength of February overall increase – which beat economist expectations of a 1.8 per cent decline – but cautioned against reading too much into the data.
“Apartment approvals in New South Wales and Victoria drove the positive figure but this is an expected blip given the lumpy nature of the high-density sector,” Ms Kilroy said.
“The latest data saw house approvals fall below their historical average of the past 35 years and they are expected to soften further throughout 2019.”
NAB markets economist Kaixin Owyong agreed that the surprise monthly spike would be unlikely to signify any change to the overall downward trajectory.
Approvals declined for three straight months before rising 2.5 per cent in January.
“We expect a reversal of this large spike next month and the trend for approvals to continue downward, alongside the ongoing deterioration in the housing market,” Ms Owyong said.
The value of total building approved rose 1.3 per cent in trend terms.
The Australian dollar briefly spiked to 71.12 US cents but, 43 minutes after the data’s 1130 AEDT release, had fallen back to its previous level of 71.05.