Australia's apartment building binge continues to unwind

Jeff Greenberg/UIG via Getty Images
  • Australian building approvals fell again in October, and are now down 13.4% over the past year.
  • Approvals to build non-residential dwellings have slumped by 22.2% over the past year. Approvals to build new houses have fallen by a smaller 4.1%.
  • Despite approvals falling again in October, the value of residential dwellings given the go-ahead actually increased.

Australian building approvals fell modestly in October, led by the apartment sector.

According to the Australian Bureau of Statistics (ABS), approvals to build new dwellings slipped by 1.5% to 17,070 in seasonally adjusted terms, leaving the decline from a year earlier at 13.4%.

The monthly decline was in line with the median economist forecast, and followed an upwardly-revised 5.5% increase in September.

Total approvals weakened in every Australian state compared to the levels of a month earlier.

Approvals to build private sector homes rose by 2.7% to 9,712, overridden by a fall of 4.8% in the pipeline of non-housing dwellings which slumped by 4.8% to 7,199.

“We had been expecting headline approvals to reconnect with the clear downtrend in October. Instead the detail is mixed,” said Matthew Hassan, Senior Economist at Westpac.

“The high rise spike reversing but detached housing and mid-rise approvals posting solid, and better than expected monthly gains.”

Compared to September, Hassan says “high rise approvals look to be down 40% but medium density are up over 20%”.

Over the year, approvals to build private sector houses fell by 4.1%, nearly six times faster than the drop in non-housing dwelling approvals which slumped by 22.2% from October 2017.

In cumulative terms, the number of dwellings approved for construction over the past year stood at 223,494, continuing the modest slide that’s now been underway since the middle of 2016.

Approvals to build private sector homes over the past year slid to 119,783, the smallest number since February this year. Non-housing dwelling approvals stood at 101,138, the lowest amount since the year to September 2017.

Despite the decline in total approvals in October, the ABS said the value of residential building work approved rose by 2.1% from September. Accompanied by a larger 4% increase in the value of non-residential approvals, that saw the total value of building work lift by 2.8% after seasonal adjustments.

“The monthly update is not sufficient to change the broader picture, but has reduced some of the emerging downside risk to near term residential building activity,” Hassan says.

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