property approvals continue

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    June dwelling approvals: 6.2%mth vs mkt f/c +0.6%

    Dwelling approvals strengthened in June, as approvals for houses surged by 13.4%.

    But apartment approvals are down 10.1% in the month and in the June quarter were 17.5% off the peak of Q3 2002.

    Private house approvals surged by 13.4% as the impact of increased lending to owner-occupiers came through with a flurry. Finance commitments for the construction of new dwellings are up 16.6% over the first five months of 2003; partially reversing the 30% fall in 2002. As a result private house approvals have increased 18.6% over the last five months to be at an above average level in June.

    Understandably, apartment approvals are the weak spot. While investor finance has continued to strengthen, the construction element of investor finance has eased. A near-term recovery in apartment approvals is unlikely, with an unprecedented number currently under construction and the level of apartment approvals now only back in line with the historic norm.

    Private house approvals over coming months will be supported by low interest rates and high consumer confidence. But a sharp rise in total approvals from here would add to excess supply and create a headwind for growth in 2004. June monthly approvals imply an annualised rate of commencements of 170,000 �Ebut, despite very strong immigration, Australia’s underlying requirement is only about 160,000.

    New dwelling construction explained 20% of Australia’s overall growth over 2001 and 2002. This will not be repeated �Ewith approvals in the June quarter still 8.8% below the 2002Q3 peak. Housing is set to be broadly neutral for growth over 2003 given this second wind in approvals.

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