An increase in private sector apartment approvals is behind a strong increase in Australian dwelling approvals in August.

The new figures released by the Australian Bureau of Statistics showed that the core detached housing sector took a small slide.

However the overall upturn signals that interest rate stability is beginning to turn sentiment around leading to some improvement in the outlook for the residential building industry, according to Master Builders Australia.

The group’s chief economist Peter Jones said it was “a welcome development but not enough to confirm a sustainable upswing is firmly entrenched given the inherent volatility in monthly apartment approvals.”

However Jones commented that “builders have become pessimistic” … and it is “hoped that the Tax Forum can find a pathway for the removal of impediments that suppress housing supply, force up prices and worsen housing affordability.”

August saw an 11.4 per cent surge in the rate of new home approvals across Australia.

In seasonally adjusted terms, there were increases in NSW (45.2 per cent), Queensland (19.7 percent), Victoria (7.3 per cent) and Western Australia (5.5 per cent) but a fall in South Australia (4.1per cent).

The Housing Industry Association senior economist Andrew Harvey noted “detached housing was down by 0.4 per cent for the month and unfortunately this gives a better indication of the inherent weakness that exists within the new home building industry at the present time.”

Urban Taskforce's chief executive Aaron Gadiel urged caution when interpreting the figures.

"These monthly figures are highly volatile and can be disproportionately influenced by small spikes in the number of multi-dwelling approvals issued in a single month.

"The largest single source of the seasonally adjusted dwelling increase was NSW, where the jump in dwelling approvals accounted for 83 per cent of the national increase."

He said NSW’s seasonally adjusted private sector house approvals actually fell by 4.3 per cent, but this was offset by a 105.6 per cent surge in approvals for private sector apartments and townhouses.

"Leaps this big in NSW's monthly private sector high density approval data are not unknown — the same thing happened in April 2009 (a 119.8 per cent jump) and March 2010 (a 119.6 per cent jump).