Approvals for new homes have marked the largest decline in seven months, after a sharp slide in go-aheads for apartment blocks.

Approvals for the construction of new homes fell 4.4 per cent in April, much worse than market expectations, but were up 16.6 per cent for the 12 months to April.

Approvals for private sector houses rose 4.7 per cent in the month, while ‘other dwellings’, including apartment blocks and townhouses, dropped 15 per cent, the Australian Bureau of Statistics said.

That fall highlights the volatility of the apartment building sector, Commsec economist Savanth Sebastian said.

He expects one or two months of weakness before the sector bounces back.

“I don’t think there’s anything significant in the result, the Reserve Bank will be comfortable there’s plenty of building work being done,” Mr Sebastian said.

Tighter lending restrictions may also have been a small drag on building approvals, he added.

“Banks are certainly being more responsible in terms of their lending policies, and I think that’s showing up in the house price data as well,” Mr Sebastian said.

Capital city home prices dipped in May for the first time in six months, with drops recorded everywhere except Darwin and Canberra, the latest CoreLogic RP Data home value index shows.

JP Morgan economist Tom Kennedy said a fall in approvals for high rise apartment buildings was to be expected.

“That has been very hot recently and was tracking at unsustainable levels, so the fact that we saw some payback today shouldn’t be a surprise,” he said.

“Even though today’s number is quite volatile, the underlying trend is quite encouraging.”

The data also showed a five per cent rise in homes approved for a single family, which is a positive given the housing market has been dominated by dwellings being bought by investors in the past year, Mr Kennedy said.

“Typically that sector is a lot more representative of what’s going on in the broader housing market,” he said.

“We do view it as a positive sign.”


By Jason Cadden
  • If anything was to be read from this result, it is that the market is still super-red hot. Looking at the seasonally adjusted figures, almost 19,000 new houses and apartments were approved for construction last month, implying an annual build rate of well over 200,000 (assuming all dwelling units approved actually make it into construction). We have never built 200,000 new homes in any year on record, so this really is a big number.

    • House prices are ridiculous in Sydney and Melbourne. But here in the CBD of Melbourne there is a mismatch between apartments that people want and what is built. There is a demand for affordable 3-bedroom apartments for retirees and small families but the developers are building mostly student accommodation, and one- and two-bedroom apartments, often very small with limited window and patio door access. There are people with buyers remorse or other reasons to sell. In looking for an apartment to purchase, estate agents often initially ask you to make an offer and sometimes even if it is lower than the suggested range the seller may show interest.

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