- Australian dwelling approvals tanked again in April. The result may have been impacted by public holidays during the month.
- Approvals to build detached houses and higher-density dwellings both fell, leaving the decline in both categories over the past year at over 20%.
- Total approvals over the past year slid to 195,299, the lowest number over a comparable period since March 2014.
- Residential investment looks set to drag on Australian economic growth in the March quarter.
- A number of economists believe the downswing in approvals is close to bottoming.
Approvals to build new homes in Australia fell heavily again in April, led by weakness in both the apartment and detached-housing sectors.
According to the Australian Bureau of Statistics (ABS), dwelling approvals slumped by 4.7% to 14,123 after seasonal adjustments, leaving the decline from a year earlier at 24.2%.
Approvals were expected to remain steady from March, according to the median economist forecast offered to Bloomberg.
Approvals have now fallen on an annualised basis in each of the past 10 months, leaving total approvals over the past year at 195,299, the lowest number over a comparable period since March 2014.
Matthew Hassan, senior economist at Westpac, said the weakness in April may have been due to the timing of Easter and the Anzac Day public holiday.
“The timing of holidays this year may have exacerbated the decline with Easter falling into April and a weak prior to the Anzac Day long weekend,” Hassan said.
“While the ABS tries its best to control for seasonal anomalies, the rarity of this conjunction makes the task difficult.”
By type of dwelling, private sector approvals excluding houses — predominantly units — fell by a further 6.5% to 5,595 in April, extending the drop from a year earlier to a mammoth 28.8%.
Over the year, a total of 80,772 dwellings were approved in this category, the fewest since December 2013.
Private sector housing approvals also slipped in April, declining 2.6% to 8,397, leaving the fall from a year earlier at 20.5%.
The monthly total in this category was the smallest since August 2013.
Over the entirety of the past year, total private sector housing approvals fell to 112,280, the smallest total over a 12 month period since July 2014.
“Overall the update again points to weakening momentum, the composition pointing to a weaker construction profile through the middle of the year,” Hassan said.
Mirroring the decline in total approvals last month, the value of residential work approved also fell, declining 2.4% in seasonally adjusted terms.
However, the value of non-residential building approvals surged by 16.1% over the same period, leaving the total value of new approvals up 4.9% from March.
“The sectors recording strong growth in recent months include offices, warehouses, aged car, and health facilities and entertainment,” said Belinda Allen, senior economist at the Commonwealth Bank, in reference to the spike in the value of non-dwelling approvals.
“Recent state budgets have also seen large announcements for social infrastructure spending, particularly health and education. This will be an important source of growth for the Australian economy over the next year or so.”
Despite strength in non-dwelling approvals, Allen said the steep drop in dwelling approvals in early 2019 will weigh on residential investment in Australia’s upcoming Q1 GDP report.
“Dwelling investment will subtract from GDP growth,” she said.
However, she offered a more optimistic assessment about the outlook for residential construction activity.
“Over time, approvals will recover nationally as demand and supply imbalances are worked through,” Allen said.
“RBA rate cuts, first home buyer assistance and changes to serviceability criteria by APRA will also help.
“Prices tend to lead approvals so we could see some stabilisation sometime after.”
David Plank, head of Australian economics at ANZ, shares a similar view to Allen.
“Given the modest turn in the credit cycle, indicated by the ANZ-Property Council of Australia survey and recent events, we think we are getting close to the bottom of the downturn in residential approvals,” he said.
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