Australasia's home for timber news and information

A mixed bag of residential building approvals

The December results for residential building approvals provided an indication of current trends as well as allowing a more definitive picture of the overall performance during 2012. Source: Timberbiz

The results for the month highlight the challenging operating environment for the industry, with approvals falling by 4.4% on the previous month on a seasonally adjusted basis.

The broader direction of activity is a little more encouraging with an increase of 3.8% in approvals for the final quarter of 2012 and approvals a significant 9.3% higher than in December 2011.

Taking these figures into account, the overall performance for 2012 was largely unchanged from the previous year.

Total approvals for 2012 dropped slightly to 151,186 from 151,866 in 2011, equivalent to a 0.6% decrease.

This rather mixed outcome is mirrored by the state-by-state results, with some states experiencing quite robust approvals activity, while others are affected by considerable weakness.

Overall monthly growth in approvals activity in December 2012 was positive in Queensland, South Australia and Western Australia. Declines were recorded in other states, most notably Victoria, Tasmania and New South Wales.

Quarter-on-quarter increases were recorded in some states: New South Wales, Queensland, Western Australia and South Australia.

Quarterly growth metrics also serve to highlight the difficult conditions in Victoria and Tasmania where contractions of -2.3% and -7.1% respectively, occurred.

It is clear that approvals are very volatile from month to month. This means that short-term trends should be interpreted with caution.

Approvals appear to be stabilising at a level of activity substantially above the recessionary threshold.

Detached homes are the engine of the market, accounting for 58% of approvals in the final quarter of 2012. Units in 4+ storey buildings (21% of total) and semi-detached houses (15 % of total) are also important components of approvals. Units in 1 to 3 storey buildings account for the remainder of the market.

In terms of the importance of states, Victoria accounts for the largest share of approvals (30%), followed by New South Wales (27%), Queensland (18%) and Western Australia (15%).

In order to obtain a view on developments in the overall national market, it is important to monitor changes in detached house approvals in larger states. The overall picture is weak, with detached house approvals falling in both Victoria and Queensland, though robust growth occurred in New South Wales.

Approvals activity in semi detached houses is much more positive, with increases occurring in all the larger states. Trends in approvals for units in 4+ storey buildings has growth in all states, with the exception of Western Australia.