Here’s NAB’s James Glenn on the building approvals surprise:

“Despite concerns around a potential oversupply of dwellings (especially apartments), construction activity may well be rebounding. 

• Residential approvals rose the most in Victoria, while Tasmania and WA also increased. Residential approval trends show a rebound in Victoria and NSW holding-up. WA/NT may have bottomed, while QLD has stabilised and SA/Tas are improving. 

• The positive trend in non-residential building approvals continued in November, with strength especially apparent lately in areas such as office buildings, warehouses and aged care.

• Both the resilience we have seen in residential approvals and the steady upward trend in non-residential approvals are consistent with other solid reads on the construction industry. Construction was the best performing industry according to the NAB Monthly Business Survey in November.”

And AMP Capital’s Diana Mousina:

“Strong approvals growth will keep house construction elevated in the near-term, which is good for GDP outcomes in 2018. Strong growth in new home building also means that the supply of new houses and (mainly) apartments will continue to be high and put downward pressure on dwelling price growth – which is already occurring in Sydney.

“We expect apartment prices in Sydney and Melbourne to decline by 5-10% this year as new supply continues to enter the market, sentiment towards the housing market continues to soften and affordability pressures in the two capital cities affects demand.

“Dwelling prices in Perth and Darwin are likely close to bottoming. Hobart is likely to remain strong and Brisbane, Adelaide and Canberra are likely to see moderate price gains this year. A property crash is unlikely nationally in the absence of much higher interest rates and/or unemployment – both of which are unlikely. We think the Reserve Bank will lift interest rates at the very end of 2018, but will keep the process of raising interest rates slow and gradual (much like has been observed in the US).”


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