The huge 27.3% jump in approvals blew away forecasts of a mere 5.1% rise and multi unit approvals surged the most at a monthly rise of 58.3% and are now up by 41.5% compared with May 2011.
Detached housing approvals were up by 9% in May 2012, but down by 8.5% when compared to May 2011. The May result follows a 7.6% fall in total approvals in April to their lowest level since May 2009.
It is a rare piece of positive news for the new home building sector, according to the Housing Industry Association, the voice of Australia’s residential building industry.
‘Building approvals were up by a sizeable 27.3% in May 2012. This result provides some hope of an improved new home building outlook emerging in time and delivers preliminary evidence that recent interest rate cuts may be starting to have an impact,' said HIA Senior economist, Andrew Harvey.
‘However, we need to keep in mind that the result comes off a very low base in April and is driven by the highly volatile multi-unit part of the market. The level of approvals in the core segment of detached housing remains well below the levels recorded one year ago,’ he explained.
Key factors behind the strong May result include a partial rebound in Western Australia which saw approvals up by 24.8% in May after a 47.2% fall in April, along with a similar rebound in South Australia.
There is also a ‘bring forward’ effect in both Victoria and New South Wales where buyers have rushed into the housing market to secure state government home buyer incentives before they end on 30 June 2012.
‘Leading indicators of housing activity over recent quarters have simply been appalling, so today’s positive building approvals result is welcome news which comes at a time when many builders, manufacturers and suppliers in the residential building industry continue to face very challenging conditions,’ added Harvey.
That should be welcome news to the Reserve Bank of Australia (RBA) which holds its monthly policy meeting today (Tuesday 03 July) and is expected to keep rates at 3.5% following two straight cuts.
‘There were some large apartment towers approved in the month, which makes the data lumpy. But this is still the first positive sign for the sector in months and suggests housing is at least troughing. We really can't see any urgent reason for the RBA to ease today,’ said Brian Redican, a senior economist at Macquarie.
The RBA cut rates by half a point in May and a further quarter in June, taking them to the lowest since December 2009. That brought the total easing since November last year to 125 basis points.
In May 2012 total seasonally adjusted building approvals rose by 25.1% in New South Wales, 31.8% in Victoria, 10.3% in Queensland, and 16.2% in Western Australia. In trend terms, total approvals rose by 21.5% in the Northern Territory and by 27.5% in the Australian Capital Territory. Tasmania was the only area to see a fall in approvals in May 2012, down by 12.1% in seasonally adjusted terms.
