Approvals for the construction of new homes has fallen by a sharp 11 per cent across Australia.
Official figures showed building approvals fell 11 per cent in September, much worse than the one per cent fall economists had been expecting.
But on the plus side, most of the fall came from the high-density dwelling category, which is typically volatile and not as important to the economy as stand-alone houses, JP Morgan economist Tom Kennedy said.
“It’s a lot weaker than we had expected but if you’re looking for the good news, it’s that the bulk of the weakness was in the high-density component,” Mr Kennedy said.
“That category is often volatile and is prone to having large downturns and large spikes.
“We think it’s more or less an aberration and we think we’ll see it bounce back in the next few months.
“It’s not a good number but it’s probably not as alarming as the headline would suggest.”
Mr Kennedy said low interest rates and the booming property market should keep building activity strong going forward.
Local councils approved the construction of 15,004 new homes in September, according to the Australian Bureau of Statistics figures on Monday.
Approvals for private sector houses fell 2.3 per cent in the month, and the ‘other dwellings’ category, which includes apartment blocks and townhouses, was down 21.9 per cent.
CommSec chief economist Craig James believes the housing market is stabilising after a series of strong results.
“Approvals have flattened out at these sorts of levels and they’re relatively high levels,” he said.
“We’re not seeing any signs of oversupply, which would be the case if approvals kept on going up.”
Mr James said it’s too early to tell what the stabilisation in building approvals will have on house prices, which rose by 10 per cent in 2013/14.
“We’ll have to wait and see when the housing supply ends up coming onto the market, there can be a degree of lumpiness that goes with these sorts of things,” he said.
“I think the fact that we’re seeing a flattening out of approvals, rather than going through the roof or going through the floor, is encouraging.”