This article is from the Australian Property Journal archive
THERE is a risk that the Australian economy is unlikely to be able to rely on building construction to support jobs growth and economic activity for much longer, according to ANZ.
ANZ senior economist David Cannington said the latest Australian Bureau of Statistics data on building approvals were weaker than expected in January.
According to the ABS, total dwellings approved fell 7.5% in January following a rise of 8.6% in the previous month. Private sector houses fell 6.0% following a rise of 6.9%, whilst the multi-unit sector declined by 10.8% in January following a rise of 9.7%.
According to ANZ, total building activity is now 15.5% lower than January 2015. This is the weakest year-on-year growth since 2012, when house prices were falling by 5% in annual terms. This result largely reflects a drop-off in higher-density housing approvals, which were more than 25% lower in the year to January.
Cannington said the figures support the view that the pipeline of planned housing construction is narrowing.
“Today’s data highlights the risk that the Australian economy is unlikely to be able to rely on building construction to support jobs growth and economic activity for much longer.
“In contrast, stronger house price data and auction clearance rates suggest that the housing sales market has started 2016 on a positive note,” Cannington said. “In contrast, today’s house price data reflects a market that has started 2016 a lot better than it finished 2015. Amidst the recent commentary around the potential destabilising impact of changes to negative gearing policy on housing and speculation about Australian house price stability, strong underlying demand for housing has supported housing sales activity and price gains.”
BIS Shrapnel associate director Kim Hawtrey said six months ago approvals were hovering above 20,000 per month, fuelled by interest rate cuts and rising house prices, which attracted investors to the housing market.
“But the latest data confirms an easing has set in, in the wake of APRA restrictions on investor lending. In trend terms, approvals have been contracting for the past 11 months.
“Over the most recent three months the national trend is down by -3%, with ACT, Northern Territory and New South Wales seeing the sharpest downwards trend since October,” he pointed out.
“On a state by state basis in January, New South Wales fell most noticeably, to just 4,260 dwelling approvals (-23%), a level not seen since November 2014 when the market was in an upswing. This reduction is largely due to the slowing in attached dwellings. Victoria in contrast continues to exhibit growth across all sectors with total dwelling approvals, up 3% in the latest month,” Hawtrey said.
Non-residential building approvals were also weak in January. Approvals have been trending lower for the past five months, with the office sector in particular continuing to contract, reflecting soft leasing conditions in most capital city markets.
Australian Property Journal
