Home building approvals in Australia showed strong signs of recovery with a 9.9% increase in the month of May 2014. Approval for construction of new homes was significantly higher than the anticipated rise of 3.2%. As compared to May 2013, the data showed a jump of 14.3%.
Private sector home approvals rose by 0.5% while the category of Other Dwellings, which includes apartment blocks and townhouses showed a very healthy increase of 27.2% as compared to previous month’s data.
This better-than-expected performance is being considered as evidence that housing sector shall drive the Australian economy even as mining investment shows signs of slowing down. Experts suggested that the sectors still showed signs of consolidation as new home sales tapered off from a four year high. However, the rise in new construction activity was agreed to be a significant improvement.
The ramp up in construction is expected to bring in more supply into the market and prevent prices from rising too quickly. The data suggested that the RBA is likely to hold rates and may, upon continuation of the trend, consider a rate cut as well.