Building approvals are running at 20-year highs

Monthly approvals to build new houses are at two-decade highs, spurred by cheap money and generous government incentives.

The HomeBuilder grant scheme has helped spur demand to build new houses. Picture: Jake Nowakowski

Monthly approvals to build new houses are running at two-decade highs, spurred by the cheapest money on record and generous government incentives.

The total number of new dwellings approved for construction, including detached homes and apartments, lifted by 2.6 per cent in November to 17,205, according to seasonally adjusted figures from the Australian Bureau of Statistics.

The number of house approvals lifted for the fifth consecutive month, rising by 6.1 per cent to 11,489 – the fastest monthly run rate since December 1999 – to be 34 per cent higher than a year before and up 40 per cent since June.

Non-detached home building approvals, in contrast, dropped by 3.9 per cent to 5377, extending a trend that has seen an extended decline after an apartment-building boom in the major cities that saw monthly unit approvals climb over 13,000 in late 2017.

Closed international borders from early 2020 have further weighed on developers’ appetite to build apartments as demand from foreign students virtually disappeared and is unlikely to reappear until 2022 at the earliest.

Amid a much better than anticipated recovery from the Covid-19 recession, economists said the signs were good that approvals would continue to climb in the months ahead. For example, lending for the construction of dwellings grew by 86 per cent year-on-year in October, underpinned by climbing house prices and a commitment by the Reserve Bank to keep rates at virtually zero for years.

Average variable home loan rates for owner-occupiers dropped from 3.7 per cent at the start of the year to 3.3 per cent, according to Canstar, while average fixed rate mortgages have fallen by 0.8 percentage points for a three-year loan to 2.3 per cent.

Government incentives are also likely to sustain a healthy pipeline of new housing construction over 2021 and into 2022, economists said.

Over the four months to December 4 there were 26,290 applications for the $25,000 federal HomeBuilder grant for new builds, which has been extended until March at a reduced level of $15,000. There were also 6174 applications for the grant for “substantial” renovations.

The value of residential alterations and additions climbed by 5.6 per cent to reach a record high in November, the ABS said.

The ABS data showed South Australia reported the strongest lift in new building approvals in November, jumping by 19 per cent in the month to 1120, largely due to a significant rise in apartment approvals. But falls were recorded in Western Australia (5.4 per cent), Victoria (4.6 per cent) and Tasmania (0.4 per cent), the ABS said.

Approvals for houses, however, climbed in every state, with Queensland’s 17 per cent lift the standout, against a more subdued 1.5 per cent rise in Victoria and a 0.7 per cent increase in NSW. Western Australia house building approvals rose by 7.5 per cent in November, the data showed.

The value of total building approved, however, fell 8.4 per cent in November. The value of non-residential building drove the decrease, plunging by 27.4 per cent after October recorded the highest value since August 2019, the ABS said.