Number of building approvals enjoys strongest growth since 2014

Easing of restrictions outside Melbourne and climbing confidence sparks 8.5pc jump in houses approved for construction.

Building approvals staged a recovery in July after months of falls.

Home building approvals soared in July as the national easing of COVID restrictions outside Melbourne and climbing confidence sparked a 8.5 per cent jump in the number of houses approved for construction – the biggest monthly increase since late 2014.

The surprising rebound in approvals followed two months of sharp declines amid increasingly shrill warnings from the construction industry that the pipeline of new projects was falling off a cliff and that the sector was in dire need of further government support.

The high-rise approvals component surged 23 per cent in the month, resulting in a 12 per cent increase in the number of dwellings approved, according to seasonally adjusted figures from the Australian Bureau of Statistics.

While total dwelling approvals – including units – had only recovered around a third of the 20 per cent decline since the pandemic began, there were 8852 detached houses approved in July, a rate similar to that before the COVID-19 crisis.

ABS director of construction statistics Daniel Rossi said the July figures “likely reflect improved consumer sentiment in May, on the back of falling COVID-19 cases and easing of ­restrictions”.

Approvals for private sector houses climbed in Queensland by 15.6 per cent and in NSW by 14.3 per cent, while Victorian house approvals lifted by a more sedate 6.1 per cent.

There were falls in Western Australia by 3 per cent, and South Australia by 1.8 per cent.

Westpac economist Matthew Hassan said “the big picture is of a solid July lift that reflects a boost from the federal government’s HomeBuilder scheme and the cycling of direct disruptions from the COVID shutdown”.

Economists were caught out by the lift in building approvals. Mr Hassan said “the initial impact of the COVID-19 shock on dwelling approvals has been relatively mild and brief”. But he warned that the heavier lockdown that came into effect in Victoria in early August “will clearly result in another round of weakness in coming months, albeit more confined to the one state”.

Housing Industry Association chief economist Tim Reardon said the lift in detached house approvals in July “is more likely to reflect building application lodgement and processing returning to normal after the shutdown”.

The value, rather than the number, of new residential building approvals lifted 11.3 per cent in July, while the value of alterations and additions fell 1.1 per cent.

In contrast, the seasonally adjusted estimate for the value of non-residential building approved fell 19.8 per cent in the month, the ABS said.

“This is no surprise as businesses have shown a reluctance to invest due to the uncertain economic outlook,” CBA senior economist Belinda Allen said.

House prices have proved remarkably resilient despite the sharpest economic downturn since the 1930s.

Sydney home values have dropped just 2.5 per cent since February, according to CoreLogic. Melbourne’s housing market has been harder hit thanks to a second wave of the virus, but prices in the country’s second biggest city are still only 5 per cent down over the past six months.