The long awaited rebound in housing construction continues to gather pace, according to the May building approvals data from the Australian Bureau of Statistics.
Seasonally adjusted new private house building approvals rose 2.5% in May, to be 11.6% higher over the year.
That’s the strongest rate for more than two years and the number of approvals – 8,113, (seasonally adjusted) was the highest since March 2011.
Private house approvals have now risen in each of the past five months and with some starts continuing their grants for first home building, (NSW’s changed on July 1 from first home buyers to first home builders only), it’s clear that the the long watched for rebound in this industry is now underway, but slowly.
The extent of the boom can be seen by comprising the year to May rise of 11.6% rise (seasonally adjusted) to the 3.8% fall in the year to December (i.e. 2012).
Overall dwelling approvals (which include units and apartments, townhouses, etc) fell 1.1% after a 9.5% rise in April.
That was because of a 9.8% fall in non-house private dwelling approvals in May, against the 18% rise in April.
Total approvals in trend terms rose 1% (and has now risen in each of the last three months).
Trend private house approvals rose 1.5% in May in another positive and that has been rising now for the past six months. They are up 10.% in the past year on this basis.
The trend estimate of the value of total building approved rose 1.9% in May and has risen for 16 months.
The value of residential building was flat. The value of non-residential building rose 4.1% and has risen for seven months.
Looking at the states, the ABS said that in NSW the trend estimate for the number of private sector houses rose 2.6% in May and has risen for 14 months, in Victoria it was up 2.3% and has been rising for four months, while in Queensland there was an 0.1% rise and it has been rising now for five months.
In WA it rose 1.2% and has been rising for 11 months, while in South Australia it rose 2.2% in May and has also been rising for the past 11 months.
A strengthening pace of activity in home building is one of the factors the RBA, Federal government and many companies are looking for as the mining investment boom slows.
In his speech in Brisbane on Wednesday, Reserve Bank Governor Glenn Stevens discussed the transition from boom-driven growth to domestic activity.
"We have, in fact, had a few handovers over the past five years – from private demand to public in 2009, then to mining investment subsequently. Now we are looking back to household dwelling spending, non-mining investment (and exports).
"Previous handovers have occurred, largely successfully. That doesn’t guarantee the next one will, though it does mean that we shouldn’t assume that it won’t occur… dwelling investment has been low for an unusually long period, with at least some households intent on reducing debt, thereby strengthening balance sheets.
"Households have accumulated a good deal of cash as well over recent years. Meanwhile, population growth is quite solid and it has been picking up a bit of late. If anything, we will need to build more dwellings than we have been over recent years.
"Meanwhile, interest rates are low, dwellings are more ‘affordable’, and finance approvals for housing purchases have risen by 16 per cent over the past year," Mr Stevens said.
Despite the improving level of approvals, housing credit has hardly grown in recent months and has averaged an annual rate of 4.5% in the past two months, up from 4.4% in the preceding three months. Housing credit for private purchases though dipped to an 0.3% monthly growth rate from 0.4% in April.
Investment housing credit is running at an annual rate of 5.5% and 0.5% a month as people buying houses negatively gear them and put them into self-managed super funds.
