A recovery in the home building sector seems to be taking hold with approvals for fully-detached houses gaining for the fifth month in a row, up 2.5 per cent in May.
HSBC Australia and New Zealand chief economist Paul Bloxham says the gain is a positive sign for the housing sector.
It shows that other parts of the economy, besides mining, are getting stronger, he says.
“We held onto the gains from the previous month and the detached house numbers are rising solidly,” he said.
“This is a sign of gradual rebalancing of growth in the Australian economy.”
However, total building approvals for new homes fell 1.1 per cent across Australia in May, seasonally adjusted, Australian Bureau of Statistics figures show.
That figure was weighed down by a 9.8 per cent fall in approvals for other dwellings, which includes apartments and townhouses.
Mr Bloxham said the other dwellings category was volatile from month to month, so little should be read into the fall in the category.
He still expects the Reserve Bank of Australia to make one more cut to the cash rate by the end of the year.
“That may be all they need to do because of the fall in the Aussie dollar,” he said.
CommSec chief economist Craig James said the past few months had shown clear signs of an improvement in housing construction activity.
“Low interest rates, strong population growth, healthy employment, and pent up housing demand is starting to see the housing sector shake off the shackles and begin a much-needed resurgence. Granted it is early days, but the sector is certainly on a recovery path,” he said.
“An ongoing lift in approvals would be beneficial for the broader economy, given it is a key forward-looking indicator.
“More approvals leads to more homes being built over the medium term, and will provide additional support to the overall economic growth.”
JP Morgan senior economist Ben Jarman said building approvals were improving, but not enough to balance out the easing in mining investment.
“We think, ultimately, it will fall a bit short of what’s required to fully offset the drags that are coming through,” he said.
“Housing alone certainly won’t make up the difference. Other things are going to have to rise too, like non-mining business investment, and that’s where the signs are still sort of patchy.”
Mr Jarman said lower interest rates were helping building approvals, along with state government first-home buyer incentives favouring new building activity over existing home purchases.
