Building approvals have fallen for the first time in five months, but economists believe it is a temporary setback for the booming property sector.
Approvals for the construction of new homes fell 3.2 per cent in February, a smaller fall than the market had expected.
It follows a gain of 5.9 per cent in January.
Over the 12 months to February, building approvals were up 14.3 per cent.
February’s fall was to be expected after four consecutive months of growth, National Australia Bank senior economist David de Garis said. “You are going to get these sorts of big changes, particularly in the multi-unit sector, you only need a couple of big projects to be approved in one month and less or more next month and these numbers can swing around a lot,” he said.
“The underlying picture is for continued trend growth in the apartment sector, as opposed to the traditional detached housing market where approvals have been flat for some period time.”
Approvals for private sector houses fell 0.1 per cent in February, and ‘other dwellings’, which includes apartment blocks and townhouses, was down 6.0 per cent.
Mr de Garis said the RBA would have to weigh up the impact of a strong housing sector on the economy against falling iron ore prices when considering interest rates at next week’s board meeting. JP Morgan economist Ben Jarman said the figures indicate the housing sector growth is clearly being driven by interest rates cuts.
“There’s at least one channel where the RBA is getting some sort of result,” he said.
“What’s missing is the spill-over from housing to consumption behaviour.”
The opportunities for investors to buy off the plan have driven the strong growth in high density dwelling approvals in recent months, and will continue to do so, Mr Jarman said.
“Property developers can effectively sell new properties off the plan to foreign buyers whereas they can’t really do that with existing housing,” he said.
“That’s probably helping to support the longer run demand for new dwellings.”