More evidence of renewed strength in housing construction was revealed in the Australian Bureau of Statistics (ABS) release of building approvals in November. The trend showed a monthly gain of 1.1% for houses and a 4.4% for units. Seasonally adjusted, houses were up 6%.
Looking over the past year since November 2012, the change in total dwellings approved was up 22%, with units beating houses with increases of 27.6% to 18% respectively. The eventual sales of newly approved buildings may be booked by the builders in the latter part of FY 2014. It could also carry into FY 2015 since houses may take 6-9 months to complete after approval is given.
Dwelling Units Approved
Source: ABS
Stock markets usually move six-months ahead of the economy, so stocks like Stockland Corporation Ltd (ASX: SGP), Mirvac Group (ASX: MGR), Australand Property Group (ASX: ALZ) and Villaworld (ASX: VLW) began moving up in mid-2012. The trend of dwelling units approved started to curve upward in late 2012 and early 2013.
The ABS report comes around the time that the Housing Industry Association and Australian Industy Group's Performance of Construction Index (PCI) was released, showing that construction for both houses and units is in an expansion phase now. The December data had houses outpacing units, with both in solid uptrends.
As Foolish readers know, building material companies like Boral Limited (ASX: BLD), CSR Limited (ASX: CSR) and Fletcher Building Limited (ASX: FBU) may all see more sales as the property market expands. Likewise, interior material suppliers such as Reece Australia Limited (ASX: REH) and GWA Group Ltd (ASX: GWA), which provide plumbing, heating, and fixtures products.
Foolish takeaway
Investors who have up-to-date market information such as from the ABS or industry associations have the upper hand on others who only start moving when it's big news in the media. This is the kind of homework that pays in more than good grades, but with solid portfolio returns.
