Data Snapshot: Building Approvals - Downturn Deepens

Good afternoon,

 

• Building approvals slumped 9.4% in August, coming off the back of a 4.6% drop in July. Approvals have now fallen in six out of the last nine months. A downward trend has clearly been established and has intensified in recent months. Weaker housing demand and falling house prices are increasingly weighing on residential construction activity. 
• In trend terms on an annual basis, a downturn is becoming increasingly evident in NSW and Victoria, where a correction in housing prices is continuing. There was also weakness in all other States, with the exception of ACT and Tasmania.
• While much of the weakness over the past year has been in approvals of “other” dwellings (which includes apartments and townhouses etc.), a downward trend in approvals of houses has become apparent in recent months. Approvals in both private sector houses and “other” dwellings have declined for two consecutive months.
• Approvals are approaching a level closer to the longer-run average. With housing prices continuing to correct and the risk that home lending will soften further, a larger slowdown in residential construction appears inevitable. The recent modest gains in dwelling investment over the first half of this year is likely to give way to further weakness in coming months. The current downturn in housing however, will be mitigated by strong population growth and a firm labour market.

 

Please see the attached report for more information.

 

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