Victoria leads 27.3% resurgence in building approvals in May: ABS

The construction sector has received a boost with the number of dwellings approved for construction rising 27.3% in May on a seasonally adjusted basis, according to ABS estimates.

 The May rise follows a 7.6% fall in April.

 The value of total building approved rose 43.4% in May after falling for 3 months with the value of residential building rising 26.8% while non-residential building rose 71%.

 The rise in dwelling approvals was driven by a number of large private sector projects in New South Wales, Victoria, and the Australian Capital Territory, says the ABS.

The strongest gains were recorded in Victoria where building approvals rose 31.8% in May followed by New South Wales (25.1%), Western Australia (24.8%), South Australia (16.2%) and Queensland (10.3%).

Building approvals fell by 12.1% in Tasmania.

Approvals for private sector houses rose 8.7% in May led by South Australia (16.5%), Western Australia (13.2%), Queensland (12.3%), Victoria (6.5%) and New South Wales (3%).

Commenting on the May figures, Julene Lee  from Westpac economics says that while overall, "the spectacular headline rise in dwelling approvals may exaggerate the situation...there is enough strength left over to indicate a material improvement in conditions".

"Dwelling construction activity will still fall in a 'hole' through the middle of this year, particularly in Victoria, but the May approvals data suggests there is likely to be a recovery on the other side," Lee adds.

Peter Jones, chief economist for Master Builders Australia says the figures are welcome relief for industry "but it is too early to confirm the results as the beginning of a sustained recovery".

“The figures are certainly good news for an industry in survival mode. They suggest the recent Reserve Bank interest rate cuts and various state government housing incentives may be starting to take hold.

“Despite the positive signs, it is too early to declare the industry on the recovery path from what has been a prolonged period of downturn. Key forward indicators remain down and the multi-unit sector is notoriously volatile," he says.

Jones says "more easing of monetary policy is required to further boost confidence and encourage a return of new home buyers into the market".