Low interest rates drive house approvals A STRONG rise in house building approvals is an encouraging sign of economic growth ahead, as low interest rates continue to stimulate the housing market. Approvals for the construction of new homes fell 1.5 per cent across Australia in November, but were up 22.2 per cent over the year to November, the Australian Bureau of Statistics said on Thursday. Local councils had approved the construction of 16,396 new homes in November. The monthly figure was weighed down by a 9.7 per cent fall in approvals for private sector apartments and townhouses. Private sector house approvals, however, rose six per cent. "It was the biggest increase we've seen in the past year, with some very big gains in NSW and Victoria," National Australia Bank senior economist Spiros Papadopoulos said. A six per cent increase in housing approvals is going to be a lot better for economic recovery and for jobs and spending than a six per cent increase in apartments. That (the figures) would give the Reserve Bank a bit more confidence that we'll start to see some better dwelling investment figures coming through and that will help support the investment outlook over the next year or two. HSBC chief economist Paul Bloxham said the data showed non-mining sectors were strengthening, helping the economy to rebalance. "The rise in building approvals over the year is expected to start to flow through to the housing construction numbers and support gross domestic product growth in coming quarters," Mr Bloxham said. The longer lag than usual between the rise in approvals and a pick-up in construction may reflect that much of the growth in approvals over the past year has been in medium-density dwellings (including apartments) which generally take longer to complete than detached houses. We continue to expect that the RBA will not need to cut rates further in this easing phase and that rates may need to rise later in 2014.