The downturn in housing construction appears to have eased for now as the latest figures suggest that the number of new residential projects being approved may have stabilised – albeit the overall picture potentially being distorted by the approval of one or two large multi-residential projects in one state.
On a seasonally adjusted basis, ABS data indicates the number of new homes and apartments approved for construction throughout Australia during the month of May came in at 1,446 – down by almost a quarter compared with the same month last year but up 0.7 percent compared with April.
To be sure, the apparently positive result should be viewed with caution as it is being driven almost entirely by a 29 percent bounce in approvals in the statistically volatile multi-residential sector in a singular state (Victoria) following an abnormally low reading for this segment in that state in April.
More than likely, this is being driven by one or two large individual project approvals as opposed to any longer term recovery.
Exclude Victoria’s multi-residential sector and approvals (seasonally adjusted) across the remainder of the country fell by 1.3 percent.
Nevertheless, the report follows other encouraging data which may signal improved housing conditions.
This includes a stabilisation of house prices in Sydney and Melbourne and the highest reading of new home sales in more than a year – the latter data set showing new home sales rising across all of Australia’s five largest states.
Housing Industry Association Chief Economist Tim Reardon welcomed the latest data.
“Recent positive news relating to house prices and new home sales has started filtering through,” Reardon said.
“Even if this isn’t the bottom of the cycle the pick-up in new home sales in May suggests the pace of decline is slowing.
“We’re hopeful market confidence has improved following the Federal election and retention of current property taxation arrangements.
“Back-to-back interest rate cuts from the RBA and the pending reforms to APRA’s mortgage lending guidelines should act to minimise any further contraction in residential building.”
Seasonally adjusted building approvals (detached housing and multi-residential combined) in May 2019 were up by 14.4 per cent in Victoria and were flat in NSW. Approvals declined in Tasmania (-1.2 per cent), South Australia (-2.9 per cent), Western Australia (-4.7 per cent) and Queensland (-6.3 per cent).
In trend terms, approvals in May lifted by 7.2 per cent in the ACT and were down by 6.1 per cent in the Northern Territory.