A lift in dwelling approvals in July provides a cause for cautious optimism that the wavering residential building upturn can regain momentum, according to Master Builders Australia, the peak body for the building and construction industry.

According to Chief Economist Peter Jones "Indications of a turnaround in house approvals, despite a flat result in July, is encouraging although it is too early to tell whether it will translate into a sustainable bounce-back following the recent set back experienced in the wake of the end of the 'boost' scheme and higher interest rates."

Mr Jones said, "The recovery in approvals of units and apartments may be gaining momentum as investor-driven activity attempts to shake off ongoing effects of the credit squeeze."

"The latest data may mark the beginning of a much-needed 'second wind' for the residential building recovery, given that total dwelling approvals are running at an annualised rate of around 160,000, forty per cent below what is required to make inroads into Australia's massive supply shortage."

He said "An extended period of interest rate stability from the Reserve Bank is critical if there is to be a much-needed long and strong upswing in residential building."

Australian Bureau of Statistics Building Approvals revealed that the total number of dwellings approved edged up in July 2010 after decreasing in the previous three months in seasonally adjusted terms.

According to the ABS, New South Wales, Victoria, South Australia and Tasmania recorded more dwelling approvals this month, gaining 9.7 per cent, 12.1 per cent, 8.3 per cent and 4.4 per cent, respectively.

Meanwhile Queensland posted less dwelling approvals in seasonally adjusted terms, losing 18.3 per cent. Western Australia declined by 4.9 per cent.

Private sector houses approved dropped a moderate 0.1 per cent due to a 5.3 per cent fall in New South Wales and a 14.4 per cent decline in Western Australia.Victoria increased 6.9 per cent, while Queensland and South Australia added 3.2 and 4.8 per cent, respectively.

The value of total building approved shed 1.3 per cent in July in seasonally adjusted terms. The value of total residential building rose by 6.6 per cent while non-residential building slumped by 15.8 per cent.

Source: Master Builders Australia, Australian Bureau of Statistics