Building approvals in Australia have fallen to their lowest level in more than five years as concerns about the extent of the likely downturn in housing construction activity intensify.
On a seasonally adjusted basis, data from the Australian Bureau of Statistics indicates that the number of new houses and apartments approved for construction throughout Australia plummeted by nine percent in November to come in at 15,465.
This represents the lowest volume of dwelling approvals in any month since August 2013.
Leading the decline is the statistically volatile multi-residential sector, where the number of new townhouses, units and apartments which were approved plummeted by 18 percent (seasonally adjusted) to 5,885.
Detached house approvals also fell by 2.7 percent.
The latest results provide further evidence of a slowdown in the market for new home building following a period of record levels of dwelling construction activity.
This is being driven by tighter finance conditions, which in turn have arisen from more stringent lending requirements imposed by the Australian Prudential Regulatory Authority in 2015 along with greater caution from banks amid the fallout from the banking royal commission.
Over recent months, ABS data for housing finance has shown a substantial slowdown in home lending activity.
Housing Industry Association Economist Diwa Hopkins expressed concern that the decline in new home building conditions could be deeper than what has been previously expected.
She encourages policy makers to be cognisant of the slowing conditions. In particular, she encourages a cautious approach when responding to recommendations from the royal commission.
“We’ve long been anticipating the current downturn in new home building, but there is a risk it could develop more quickly and strongly than expected,” Hopkins said.
“Policy makers and lenders alike need to be cognisant that ordinary home buyers are now facing blowouts in loan processing times and also much greater rates of flat-out loan rejection.”
“Today’s results show how this is weighing substantially on the new home building sector.”