Australian building approvals rebounded in April but the overall trend remains lower

Australian building approvals rebounded in April, recovering around half the fall reported in March.

And now, like then, it was largely driven by volatility in apartment approvals.

According to the ABS, new approvals rose by 4.4% to 17,414 in seasonally adjusted terms, topping expectations for a smaller increase of 3.0%.

The prior month's figure, previously reported as a massive plunge of 13.4%, was revised to show a smaller, yet still ugly, 10.3% decline.

The number of approvals was still down 17.2%, compared to April 2016, cementing the view that residential construction boom is now nearing or at its peak.

Like March, the movement in the headline figures was largely driven by apartments, only this time to the upside.

The ABS said that approvals for private sector dwellings excluding houses jumped 9.6% to 8,039. That was a significant turnaround from March when they slumped by 18.2%.

Still, even with that increase, it was still down a massive 26.5% down on the levels of a year earlier.

While approvals in this category tend to jump around from month to month, courtesy of the sharp lift in the number of large-scale apartment complexes seen in recent years, the overall trend, like total approvals, remains lower.

This excellent chart from JP Morgan shows that in visual form.

Outside of high-density dwellings, the ABS said that private sector housing approvals edged up by 0.5% to 9,137, leaving them down 7.5% on 12 months earlier. Previously approvals in this category fell by 2.7%.

Given the increase in new housing and apartment approvals reported, the total value of approvals also increased.

"The seasonally adjusted estimate of the value of total building approved rose 7.2% in April following a fall of 15.4% in the previous month," it said.

"The value of residential building rose 8.2% following a fall of 22.3% in the previous month. The value of non-residential building rose 5.5% following a fall of 1.3% in the previous month."

Tom Kennedy, economist at JP Morgan, says that given the downtrend in approvals, and the lag time between approvals and housing starts, points to the likelihood that Australia's building boom is at or near its cyclical peak.

"The failure of the April print to meaningful recoup the prior month’s plunge means quarterly approvals growth in Q2 remains in negative territory," he said following the release of today's report.

"While we don’t think residential construction is quite at its peak, the current flow of building approvals suggests not much further upside from here."

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