Home approvals spike in face of pessimism

APPROVALS for the construction of homes jumped a surprise 11.7 per cent in November, well up on market expectations of a 1 per cent fall.

The rise was driven by a 37.9 per cent spike on a seasonally adjusted basis in Victoria, a 10.4 per cent rise in Tasmania, and 4 per cent in WA.

However, JP Morgan analyst Tom Kennedy said it was unlikely to be sustained.

“We are inclined to view the November approvals surge as likely to come with a sharp correction in coming months,” Mr Kennedy said.

“Some mortgage rates have started to creep higher and macro prudential policy will remain a binding constraint on mortgage growth.”

Victoria’s increase was due to a spike in apartment and townhouse building in Melbourne, which Mr Kennedy said was likely due to the approval of a large project

ANZ senior economist Daniel Gradwell said Victoria’s apartment approvals were at a record high, but agreed the surge would slow.

While the number of highdensity approvals was short of the high of two years ago, single family dwelling approvals — which JP Morgan regards as a more accurate reflection of trends — came in weaker, down 3 per cent on October.

Approvals in Sydney and Brisbane fell by 2.3 per cent and 2.4 per cent respectively.

Total building approvals were up 17.1 per cent over the 12 months to November.

Meanwhile, the festive sea- son glee has trickled through to consumers in the new year, with confidence climbing to a more than four-year-high.

The ANZ-Roy Morgan Consumer Confidence Index shows a 4.7 per cent rise from mid-December to 122 points — its highest since November 2013 — thanks to increases in all sub components.

Consumers remained optimistic about financial conditions, with sentiment towards current and future financial conditions up 5.8 per cent and 4.2 per cent respectively.

Australia’s economic situation was also perceived in a better light, with views on current economic conditions rising 5.2 per cent to 113.7 — the highest level since September 2013 — and on future economic conditions jumping 4.2 per cent.

The time to buy a household item index bounced from its 1.2 per cent fall in December to rise by 4.4 per cent, while inflation expectations remained steady at 4.5 per cent on a four-week moving average, despite higher petrol prices.