Building approvals rose in February, offering a welcome measure of short-term relief amid Australia’s persistent housing shortage.
Total dwellings approved increased by 29.7% during the month to 19,022, according to seasonally-adjusted data from the Australian Bureau of Statistics (ABS). That's the strongest monthly gains since February 2022.
The increase was attributed to a rise in private dwellings excluding houses — or apartment blocks or units — which rose 101.2% in February to 8,922. Private sector houses, meanwhile, increased by 0.2% to 9,847.
But ANZ Economist Madeline Dunk cautioned that the apartment figures can swing sharply month to month, often driven by just one or two major development projects.
"It is a really jumpy series [of data]," Dunk told Australian Broker. "Let's say a big apartment block gets approved. That adds a significant amount of building approvals that month. And if an apartment block doesn't [get approved] and it gets delayed to the next month or whatever, it might have bigger flow and effects later. Because of the number of apartments in a huge block."
In a note, Commonwealth Bank of America's (CBA) Associate Economist Lucinda Jerogin said: "Building approvals data is notoriously volatile. Trend data can help smooth volatility. Trend monthly approval figures indicate a continued lift in momentum since early 2024 and an acceleration in growth more recently."
Multi-unit approvals rose 1.7% month-over-month, up 22.4% year-over-year, while detached homes increased 0.9%, month-over-month, or up 7.5% annually.
Jerogin added the current higher interest rate environment, combined with tensions in the Middle East, mean building approvals are likely to fall in the short-term.
"Residentia approvals and building activity are the most responsive sector of the economy to interest rates," she wrote. "There are also rising costs for many inputs into construction due to the Iran War."
Still, amid Australia’s persistent housing shortage, building approvals represent the critical first step toward increasing housing supply. The growth in building approvals follows two months of declines. In January, total building approvals decreased 7.2%. That's on top of a 14.9% fall in December.
In 2023, Prime Minister Anthony Albanese set an ambitious target of delivering 1.2 million new homes nationwide by 2029 under the National Housing Accord. However, many critics argue the goal is unrealistic. As building approvals — which do not even guarantee that construction will proceed — continue to decline, the target appears increasingly out of reach.
By state, Victoria led the pack with total dwelling approvals with an 85.1% rise in February. Queensland, South Australia and New South Wales also had double-digit growth, up 14.7%, 12.3% and 10.1%, respectively. Total dwelling approvals rose 3.1% in Western Australia. Tasmania, meanwhile, was the only location to record a loss, with total dwelling approvals down 27.7%.
Approvals for private sector houses varied by state. NSW, Victoria and South Australia recorded gains, up 13.7%, 7.7% and 5.8%, respectively. But in Queensland and Western Australia, private sector house approval fell by 13.4% and 7.1%, respectively.
