Building approvals post modest rise

The number of new dwellings approved rose 2.9 per cent in November, offsetting a fall the month before.

The modest gain was driven by a 10.1 per cent rise in the volatile non-house sector (which mainly covers apartments, and is skewed month-to-month by the approval of large developments).

The rise in the Bureau of Statistics figures for apartment approvals in November follows a 15 per cent fall in October.

Approvals for new detached homes eased 0.3 per cent, following up a 0.2 per cent decline the previous month.

Total dwelling approvals are up 13.2 per cent over the year to November, with apartment approvals increasing 36.4 per cent and private sector houses up 0.5 per cent.

UBS economists Scott Haslem and George Tharenou say the figures demonstrate a moderate housing recovery is underway in Australia.

"Overall, residential building approvals are trending up, stimulated by lower interest rates (noting this November data predates the RBA's 25 basis point rate cut in December)," they wrote in a note on the data.

"Coupled with the ongoing momentum suggested by the lift in construction lending and 'time to buy a dwelling' [surveys of consumers], this is consistent with our forecast of a recovery in dwelling commencements (from 138,000 in 2012) to 150,000 in 2013 and 2014.

"Indeed, we expect a rebound in housing activity to support the rebalancing of [economic] growth in 2013." The Commonwealth Bank's chief economist Michael Blythe says housing is very important to the domestic economy because of the flow-on spending it generates.

"We know from the work that the ABS, for example, have done that basically every dollar that you spend on residential construction you generate $1.31 of spending somewhere else in the economy," he said.

"You build a new house and you've got to fill it up with big screen TVs and the like, so if you can get that bit moving then it will go at least part of the way to filling in that emerging growth pothole [left by the slowdown in mining investment]." However, industry groups maintain a more cautious view of the improving housing figures, saying more cuts are needed to ensure the tentative recovery continues.

The Master Builders Australia's chief economist Peter Jones says the increase in dwelling approvals is not broadly based.

"November's headline increase in approvals appears to be narrowly based, reliant on an unsustainable spike in inner Melbourne units rather than any broad-based upswing," he noted.

"The danger is that the recovery could run out of steam as the impact of previous interest rate cuts appear to have failed in lifting new homebuyer confidence and underpinning a sustained housing recovery."

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