Approvals for residential building continued to hold steady over the March quarter, proving that the housing market had momentum as it entered 2020, according to the latest figures from the Australian Bureau of Statistics (ABS).

Building approvals clocked a 1.8% quarterly growth in March, with houses and units registering gains of 1.9% and 1.5%, respectively.

"At least up until the end of March, we were looking at solid home building activity across most regions for 2020," said Tim Reardon, chief economist at the Housing Industry Association.

New South Wales helped boost the overall quarterly growth after it recorded a seasonally-adjusted 16.5% increase in building approvals. Tasmania also posted a robust gain at 6.1%.

"New South Wales had the strongest month for multi-unit approvals since February 2019, to make the March quarter 28.6% higher than the December 2019 quarter. This suggests that there was another cycle, albeit smaller, of apartment building on the way," Reardon said.

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Tasmania also posted a robust growth at 6.1% while approvals in Western Australia, Victoria, and Queensland remained flat. On the other hand, approvals in South Australia declined by 19.1%.

In terms of housing type, both detached housing and units approvals grew over the quarter, up by 1.9% and 1.5%, respectively.

While the gains in approvals indicate strong housing market fundamentals, Reardon said the recent data have yet to reflect any impact of the restrictions imposed due to COVID-19.

"Due to the lag between purchasing a dwelling and getting a building approval, these results are from sales prior to the restrictions on trade and travel," he said.

Reardon said the approval figures and the data on new home sales, house prices, and housing finance showed that the market was starting the new decade strongly.

Maree Kilroy, economist at BIS Oxford Economics, said the COVID-19 shock has yet to manifest through in the approval data.

"Dwelling approvals are expected to weaken over the remainder of 2020 as a response to significantly weaker demand for new dwellings," she said.

Denita Wawn, CEO of Master Builders Australia, said the COVID-19 outbreak could potentially halt the construction of 43,000 homes over the next 12 months. Master Builders previously projected that there would be around 159,000 new housing commencements in 2020/21.

“We now expect there to be only around 116,000, a drop of 27%. There is already a current shortfall in achieving the required target of 200,000 homes a year which means that the impact on housing needs of our community will be severe,” she said.

Wawn said the federal and state’s governments’ policies and stimulus measures will be vital in ensuring that the impacts of the outbreak will not be severe.

“We want the building and construction industry to be in shape to rebuild Australia. We want to protect the viability of hundreds of thousands of small businesses and the jobs of a million Australians. For that we need governments to act now,” she said.