Latest figures from the Australian Bureau of Statistics (ABS) showed building approvals rose 6.1% in September to 13,286. Analysts were forecasting a 2.1% for the month. Approvals to build private dwellings rose 4% - it's highest level in 16 months. Solid demand from the unit and apartment sector drove the overall result, with approvals jumping by 11.4%. Commonwealth Bank of Australia economist, Joseph Capurso, said building approvals are strong and suggests that consumers appear to have shrugged off the RBA's recent rate rise. "The fundamentals support a high level of approvals. In our view, strong growth in population and low unemployment will support demand for housing even though interest rates are rising. Another interest rate increase-likely to be next week-will not cause a slump." However, not every one is optimistic about the prospect of the housing sector. Despite the healthy growth in building approvals, the Housing Industry Association (HIA) sees a subdued outlook for the new housing market. It's latest survey of the country's largest 100 residential builders revealed a 3% drop in sales of new home and units in September, blaming the increase in interest rates for the weak numbers. "Higher interest rates don't only hit buyer sentiment, they also worsen an existing housing supply problem. This lack of supply is costing the industry growth and is putting more pressure on rental markets," according to Simon Tennent, HIA's executive director for economics and housing.

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