Building approvals in surprise tumble

THE number of building approvals dropped by a shocking 9.7 per cent in July, bucking predictions of a flat result.

Market consensus had been for the number approvals to remain flat and for credit growth to inch up by 0.2 per cent. Instead, approvals for private sector houses fell 3.3 per cent on a seasonally adjusted basis, and the “other dwellings” category that includes apartment blocks and townhouses fell by a dramatic 18.4 per cent.

Dwelling approvals fell in the Australian Capital Territory (22.4 per cent), New South Wales (6.5 per cent), Tasmania (3.8 per cent), Western Australia (3.7 per cent) and Victoria (2.1 per cent) in trend terms and rose in South Australia (1.9 per cent) and Queensland (1.1 per cent), while the Northern Territory was flat.

Economists said approvals were coming off a high level and stabilisation rather than improvement was the hope.

“The 50 basis points of easing delivered by the RBA already this year, tweaks to lending requirements by APRA and the positive pricing and sentiment shift following the federal election all argue SATURDAY, AUGUST 31, 2019 for a stabilisation in coming months,” JP Morgan’s Tom Kennedy said. “However, the residential construction pipeline remains elevated and an obvious headwind to a sustained rebound in approval growth.”

Over the 12 months to July, total building approvals for dwellings fell by 28.5 per cent, the Australian Bureau of Statistics said yesterday. Apartment approvals, more volatile than houses, were 39.3 per cent down over the same period.

AMP Capital senior economist Diana Mousina suggested residential construction would still be a drag on GDP growth for the next six to nine months.

“The downtrend in housing construction has taken building approvals back to 2012 levels,” Ms Mousina said.