Home building approval numbers are still higher than a year ago, as low interest rates encourage investment in new homes.
Approvals for the construction of new homes fell five per cent in February, after a 6.9 per cent gain in January.
Over the 12 months to February, building approvals were up 23.2 per cent, the Australian Bureau of Statistics said on Wednesday.
Despite a fall in the construction of new homes in February, the breakdown of the figures show the residential construction sector is strengthening, JP Morgan economist Tom Kennedy says.
“If you look at the data over the past few months, there is a clear uptrend in single family dwellings,” he said.
“Multi-unit buildings are typically bought by investors, whereas single dwellings are bought by families, so it’s a more accurate indication of what is going on at the household level.”
Approvals for private sector houses fell 2.1 per cent in February, and the ‘other dwellings’ category, which includes apartment blocks and townhouses, was down 8.7 per cent.
Mr Kennedy said it was a strong result despite the big February fall.
“The data does suggest there are signs of life out there in the residential construction sector,” he said.
CommSec chief economist Craig James also said building approvals remained strong.
“We are seeing building approvals, in trend terms, at record highs. We’ve got activity up 30 per cent compared to a year ago,” he said.
However he said the data will continue to be volatile from month to month.
But the recent run of good economic data shows the chances of another interest rate cut from the Reserve Bank of Australia are “pretty much dead and buried”, Mr James said.
“We think that rates won’t rise until the end of the year at the earliest,” he said.
Housing Industry of Australia senior economist Shane Garrett said a continuing low interest rate environment will help the construction sector strengthen further.
“A continuing strong volume of new supply will flow through to help alleviate dwelling prices for the existing stock,” he said.
“Strong residential building activity is a good thing for affordability.”