Building approvals surged in November, spurred on by a sharp increase in new apartment buildings in NSW according to the latest data from the Australian Bureau of Statistics (ABS).
Total units approved jumped by 8.9% after dropping by 3.6% in October. There were 14,620 dwelling approvals in November - the highest result in three and a half years. On a year-on-year basis, this represents 14.6% growth in new buildings approved. Detached housing remained in the doldrums however, notching up a small gain of 0.30%.
CommSec chief economist Craig James says that the trends are very "encouraging". "For the first time in almost three years, the number of approvals can be finally described as 'above-normal', that is, above the longer-run averages," he says.
"Overall, we believe that there's a light at the end of the tunnel for the beleaguered home building industry. Demand for accommodation is soaring, with population growth at the strongest pace in 18 years, while supply of new homes has been struggling to keep up."
The strong numbers are also seen as a sign that investors may be shifting their attention from the sharemarket following a massive decline in the recent weeks.
"It may be the case that investors are warming to higher house prices and surging rents, and starting to shift attention from the sharemarket to the property market," says James. "Property will be seen as an especially favourable investment destination if the sharemarket continues its soggy performance in coming months."
Housing Industry Association (HIA) chief economist Harley Dale says the strong numbers from the unit sector may indicate that the bottom of the cycle has passed, however he warns that there is a long recovery road ahead following four years of weakness.
"The first half of 2008 is going to be a challenging period for new home building amidst upward pressure on interest rates. It will be difficult for a sustained recovery in new home building to emerge," says Dale.
