Housing rebounds, but it won’t last

BUILDING approvals bounced in June, led by a spike in approvals for apartment blocks, but economists say housing construction continues to gradually decline.

Approvals for new homes jumped 10.9 per cent in June, the Australian Bureau of Statistics said, well above the 1 per cent increase the market had expected.

Approvals for “other dwellings”, which includes apartment blocks and townhouses, surged 20 per cent, and approvals for private sector houses rose 3.4 per cent.

June’s strong growth follows significant falls in recent months and points to a gradual decline in housing construction, Commonwealth Bank senior economist Gareth Aird said.

Over the year to June, building approvals were down 2.3 per cent, with apartments and townhouses down 6.6 per cent and houses up 1.4 per cent.

“The 20 per cent spike in the highly volatile multi-units over the month continues the recent pattern of big monthly falls followed by solid rises,” Mr Aird said.

“The trends in the building approvals data, coupled with strong underlying demand for housing, underpins our view that the decline in residential investment will be gradual and elongated. This means that the impact on the economy will be milder than in previous residential downturns.”

ANZ senior economist Daniel Gradwell said the sharpest falls in approvals appear to be in the past, but the winding down in housing construction will continue.

The Australian Prudential Regulation Authority capped interest-only mortgage lending on March 31, telling lenders to limit higher risk interestonly loans to 30 per cent of new residential mortgages.

That set off fresh rate in-