Building approvals resumed fall in June
Building approvals resumed their downward trajectory in June, suggesting May's respite was a brief interlude rather than a sign that interest rate cuts were boosting the market.
Approvals for private sector houses rose 0.4 per cent according to seasonally adjusted data released Tuesday by the Australian Bureau of Statistics, but the "other dwellings" category that includes apartment blocks and townhouses fell 6.5 per cent.
That meant overall approvals dropped by 1.2 per cent in June and were 25.6 per cent lower over the 12 months to June, the ABS said.
Approvals in the "other dwellings" category were 39.3 per cent lower than a year earlier.
The result missed consensus forecasts that approvals would follow May's 0.3 per cent rise with a 0.2 per cent increase in June, but just about met the most pessimistic economist expectations.
Westpac's Matthew Hassan said dwelling approvals were still soft but that he suspects a stabilising trend to emerge more clearly over the second half of the year.
"Further weakness in new dwelling construction remains locked in for 2019 and the first half of 2020, with any stabilisation in approvals likely to be slow to play through to activity due to the long lags on high rise projects," Mr Hassan said.
ANZ economists Adelaide Timbrell and Felicity Emmett said June and July's back-to-back cash rate cuts by the Reserve Bank - along with a loosening of lending affordability criteria and the coalition's surprise election win - had yet to have an impact.
"The sentiment effects from the election, APRA credit easing and rate cuts are yet to flow through to building approvals data, but we still expect a recovery as a result of these changes," they wrote.
Nonetheless, BIS Oxford Economics economist Maree Kilroy said downside risk for the apartment market remained.
Public confidence in quality and safety of high-rise residential buildings is at a low ebb, with regulators, government and the construction industry under the spotlight over issues including structural cracking and combustible cladding.
"Apartment pre-sales [are] remaining weak and build quality concerns [are] escalating," she noted.
This month's Australian Industry Group/Housing Industry Association Performance of Construction Index data showed apartment building falling for a 15th straight month as companies complained about increasingly squeezed profit margins.
The PCI also indicated that house building contracted for the 11th month in a row.
JP Morgan's Ben Jarman said annual rates of change in building approvals "still look ugly", and said residential investment could take 0.1 percentage point off GDP growth in the June quarter.
The Australian dollar dipped slightly on the release of the data, falling from 69.01 US cents at 1130 AEST to 68.96 five minutes later.
The local unit was back at its pre-release level by 14355 AEST.
In trend terms, building approvals were worst in the ACT, with total approvals falling 4.7 per cent.
They fell 3.8 per cent in Tasmania, 3.5 per cent in WA, 2.9 per cent in NSW and 0.8 in South Australia, while the Northern Territory's 5.8 per cent rise handily outpaced Victoria's 0.4 per cent and Queensland's 0.2 per cent.
Overall approvals fell 1.3 per cent in trend terms.
"The trend series for total dwellings has fallen for 19 consecutive months," ABS director of construction statistics Daniel Rossi said.
However, the total value of total building approved rose 0.4 per cent in June and has risen for six months.
Back to Breaking News
Print this page