Housing approvals drop, to remain subdued

The Australian Bureau of Statistics’ (ABS) latest Building Approvals data has revealed that residential property approvals fell 1.1 per cent in seasonally adjusted terms over the month to August.

The decline was driven by a 2.4 per cent slide in approvals for detached dwellings, offset by a 3.1 per cent increase in apartment approvals.

According to an analysis from ANZ Research, the weakness was concentrated in Queensland where approvals slipped 21 per cent, driven by a 48 per cent collapse in apartment approvals.

Approvals in South Australia were also weak in August, falling by 28 per cent, while NSW and Victoria recorded increases of 10.6 per cent and 6.5 per cent, respectively.

Meanwhile, in Western Australia, approvals increased 4.2 per cent, following on from a 9.0 per cent rise in July.

In total, national dwelling approvals are down 21.5 per cent in annual terms, with detached housing down 17 per cent and apartment approvals down 28.9 per cent.

Reflecting on the data, senior economist at ANZ Research Felicity Emmett said that the decline in approvals was reflection of continued weakness in construction activity.

“The ongoing weakness in housing approvals points to further falls in residential construction over coming months,” she said.

Ms Emmett added that she expects approvals to improve in the coming months but to remain subdued over the medium term.

“September should see a bounce given reports of some large apartment block approvals in Sydney, but the pipeline of activity elsewhere is diminishing,” she said.

“We do expect to see a broad-based improvement in approvals in coming months, but given the falls to date, construction is likely to remain weak for some time.”

Maree Kilroy, economist at BIS Oxford Economics agrees, adding: “Approvals are expected to keep trending down over the remainder of 2019.

“With weak greenfield land and off-the-plan apartment sales over 2018-19 providing a strong negative forward lead for dwelling approvals.”

Ms Kilroy concluded: “Soft signs of increased credit availability stabilising the existing property market have emerged.

“Not until upgraders and downsizers see sustained house price growth will momentum build in the existing property market, enough to flow through to increased demand for new dwellings.”

[Related: Housing rebound gathers steam]