Approvals to build new apartments in Australia are falling fast

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Australian building approvals fell heavily in May, reversing a sharp rebound reported previously in April.

And, as has been the case for some time now, the wild monthly movement was driven by volatility in apartment approvals, only this time to the downside.

According to the ABS, total building approvals fell by 5.6% to 16,448 in May in seasonally adjusted terms, completely offsetting a 4.8% increase in April that was larger than initial estimates.

The decline was far larger than the 1.3% median estimate that had been expected by economists.

The sharp decline left approvals down 19.7% on the levels of a year earlier, thanks largely to continued weakness in unit approvals.

This chart shows monthly building approvals by category in trend terms over the past decade.

The ABS said that private-sector dwelling approvals excluding houses — largely units — tumbled by 12.1% to 7,027, leaving the decline on a year earlier at 31.3%.

The sharp monthly drop in unit approvals was partially offset by private housing approvals which increased by 0.6% to 9,252. Still, even with that modest increase, it still left approvals in the category down 6.8% from a year earlier.

Mirroring the decline in total approvals during the month, the ABS said that the value of new residential approvals fell by 3.3% in seasonally adjusted terms, partially reversing a 6.1% increase in April.

The weakness in residential work approved was offset by a 5.3% increase in the value of non-residential approvals, leaving the total value of approvals flat on a month earlier.

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