Australian building approvals fell less-than-expected in July, offering further hope that the downturn in the nation’s residential construction will be shallower and slower than what many currently predict.
According to the Australian Bureau of Statistics (ABS), total approvals fell by 1.7% to 18,299 in seasonally adjusted terms, leaving the year-on-year decline at 13.9%.
Markets had been expecting a decline of 5%, leaving the total approvals down 16.6% on the levels of a year earlier.
June’s stellar increase of 10.9% was also revised higher to 11.7%, adding to positive July result.
That was the largest percentage increase since July 2016, so the modest decline reported today could almost be deemed to be a strong result.
Over the month, the ABS said that private-sector housing approvals were flat at 9,743, leaving them up 2.3% on 12-months earlier.
Helping to explain the weakness in the headline number, private-sector approvals for dwellings excluding houses — namely apartments — fell by 6.7% to 8,080, leaving them down a massive 29.5% over the year.
In trend terms, helping to eliminate the impact of the wild monthly swings in large apartment complexes, the ABS said that total approvals rose by 0.7%, leaving them down 11.4% on 12 months earlier.
Approvals for private-sector houses rose by 1% in trend terms to 9,656 while those for dwellings excluding houses inched higher by 0.1% to 7,914.
Over the year, house approvals were down 0.3% while those for dwellings excluding houses fell by 23%.
Despite the sharp decline in apartment approvals, the continued strength in housing approvals suggests that the unwind in Australia’s residential construction boom may be far more modest than many forecasters currently predict.
Indeed, as seen in the chart above, not only are housing approvals starting to trend higher, apartment approvals also appear to be stabilising at what is still an elevated level.
The recent improvement coincides with a pickup in loans to build and buy new houses, something ANZ’s economics team said pointed to the likelihood of a rebound in building approvals in the months ahead.
“The trend value for these is now some 9% higher than at the end of 2016,” it said in a note released earlier this month. “In the past this combination of finance has been a very reliable indicator of the level of building approvals.”
On the early evidence, it appears that call is looking good.
Mirroring the modest drop in approval numbers, the value of new work also fell, dropping 0.4% in seasonally adjusted terms after rising in each of the past three months.
The value of residential building fell 2.2% following a rise of 5.1% in June while those for non-residential building rose by 2.4%, the fourth monthly increase in a row.
The continued strength in non-residential and housing approvals suggests that activity levels across the broader construction sector remain firm, mirroring the findings of the latest Performance of Construction Index from the Ai Group which rose to a record-high in July.