We just got further confirmation that the Australian economy is becoming increasingly unbalanced and reliant on housing as its only growth engine.
Total dwelling units (all housing of any type) rose a spectacular 7.9% to bring the year on year total to 9.1%.
Of course the RBA wants housing to be built to loosen up supply and increase employment.
But, even accounting for the shift toward increased housing density, the break-up of the data suggests there is a large speculative element in these approvals is the fact that “private sector dwellings excluding houses” rose 19.6% in January taking the year on year rate to 23.6%. On the flipside private sector housing only rose 0.4% in January and is down 2.9% in the year to the end of January.
The total number of approvals of 19,282 is also a record.
David Scutt of Scutt Partners just tweeted this chart highlighting the wild stat.
Australian house and unit approvals. For only the second time in history the latter outnumbered the former pic.twitter.com/WMzN6AZEs3
— David Scutt (@David_Scutt) March 3, 2015
Of course a massive lift in supply is a natural salve to rampaging price increases. But, the time lag between approval and construction suggests Australian home buyers are entering a dangerous phase which could mark the top of the market.
That would mean buyers purchasing now might be under water sometime in the next 12-18 months.
That’s what the RBA means when it warns that house prices rises (and the associated debt) could cause economic risks to the economy.
The RBA board will have already made its decision this morning. But this data highlights why it should wait for housing to cool before cutting rates again.