Guide to Understanding Building Approvals Figures in Australia

What are the Australian building approvals figures?

Its the data that shows the:

  • Number and value of dwelling units approved by:
    • Sector (public or private) and
    • State
  • Number and value of new other residential dwelling units approved by
    • type of building
  • Number and value of non-residential building jobs approved by:
    • Type of building (retail trade, offices)
    • Value ranges
  • More detailed data is available for capital cities

Example: ABS Apr 2013 Building Approvals Published

Ok so what is a building approval?

“A building approval required for a development to ensure building complies with building laws, including the Building Code of Australia” (ACT Govt.). If constructing a development first the development proposal must be approved. For those building on their own piece of land this is the the process you need to go through. However for many buying their first home or investment property through a property developer (which is most common) the building approval process is done by the vendor (developer)who is building/constructing your home or property.

How are building approvals obtained?

  1. A licensed building surveyor is appointed as a certifier
  2. A building approval application must be submitted with the necessary fees
  3. Employ a licensed builder or become licensed as an owner-builder

Smaller projects like a building a 1 or 2 storey home can have much faster turn-around times than multi-storey developments. For example NSW Planning offers 10 day building approvals for building or renovating a home.

Who publishes building approvals and how often?

While state authorities regulate building approvals the figures in Australia are published monthly by the Australian Bureau of Statistics (ABS). They are generally released one month after the reporting month. E.g. April’s figures may be released at the end of May.

Why do we care about building approvals figures?

  1. The building industry employs Australian workers and the number of building approvals has a direct correlation with jobs available in the industry. Basically you need to employ people to building developments. This has flow on effects to the jobs market and broader economy.
  2. Building approvals have a close correlation with house prices (see below).

What do building approvals mean for the property market?

This is the money shot for property investors and home owners. The chart below shows that house prices and building approvals move very closely. In fact if you take a look at the data building approvals actually leads house prices. For this reason it is considered a ‘leading indicator’. One reason it is useful is because it is published monthly meaning it is quite timely. This is compared to the ABS house price data that is published quarterly.

Australia Building Approvals Vs House Prices 

Sources: ABS[1], My Money Calculator

What does it mean for other markets?

Well building approvals are actually published at the same time as Capital Expenditure figures every month. So for intraday trade in equities, FX and commodities it’s not easy to differentiate the effect of the building approvals alone.

The chart below shows the ASX200’s reaction to the April 2013 Building Approvals + Capex data.

4942 to 4896 = 46 point fall = -0.93% within 2 hours of the release. This is a fairly substantial move.

ASX200 SPI Futures 5M Chart - AU Building Approvals

ASX200 (SPI Futures), Chart Created With Interactive Brokers Trader Work Station

Sources

ABS Apr 2013 Building Approvals Published

ACT Environment and Sustainable Development, Building Approval

NSW Housing Code, Building or renovating a home

[1] Established houses percentage change from a corresponding quarter of previous year; Weighted Average of 8 Capital Cities. Avail here