Building approvals jump on apartments, but construction sector still in contraction

Building approvals increased by a seasonally adjusted 7 per cent in November, driven by a rise in apartments and units, which jumped 17.3 per cent.

Bureau of Statistics data showed 17,569 dwellings were approved in total, with apartments and townhouses making up 7,966 of the total.

Data on the apartment sector is volatile, with large projects skewing data up and down from month to month.

In the more stable trend data, approvals fell 2.9 per cent November, down for the sixth consecutive month, with analysts again noting an oversupply of apartments in Brisbane and Melbourne.

Dwelling approvals fell in the Northern Territory, New South Wales, Queensland, the ACT, Victoria and South Australia.

Western Australia was the only state where approvals increased, up 1.9 per cent, while they remained flat in Tasmania.

"We anticipate that new dwelling starts will decline over the next 12 months, with this likely to be felt on the ground towards the end of the year," wrote Housing Industry Association senior economist Shane Garrett in a note.

Construction sector still in contraction

Meanwhile, the Ai Group's Performance of Construction Index (PCI), which gives a measure of construction industry activity, increased 0.4 points to 47 in December, but still remained below the 50-point level that separates expansion from contraction.

"The construction sector closed out 2016 with a third straight month of contracting conditions," said the Ai Group's head of policy, Peter Burn, in a statement.

"While levels of apartment building remain well above average, the furious pace of a year ago clearly eased through 2016."

Activity, new orders and employment all declined from the previous month, while the four sub-sectors of apartment building, house building, engineering construction and commercial construction also shrank in December.

"Both house and apartment building activity contracted again during the final month of 2016, although the pace of decline has slowed on the apartment side of the market," Mr Garrett noted.