Some intriguing signs from the property sector yesterday.
We saw more signs the housing construction boom is fading, but not collapsing, while there were more indications demand for established housing in the hot Sydney market in particular is cooling, with Melbourne starting to catch the chill.
Building approvals rose a solid 2.2% in September, up from the previous month’s 9.5%, which was revised down sharply from the first reported 6.9% fall, meaning September’s rise got nowhere near the level of August’s approvals.
Over the year, approvals surged 21.4%, thanks to the big rise in units, townhouses and apartments, etc.
Approvals for private sector houses fell 1.9% in the month, and the ‘other dwellings’ category, which includes apartment blocks and townhouses, was up 6.1% and was once again responsible for the rebound, just as it was responsible for September’s plunge.
The revised 9.5% slide in August was the biggest monthly fall in 11 months. On a year-on-year basis, approvals were up 21.4%, the fastest rate since May but below economists’ expectations for a 24.1% rise.
So far this year, every monthly rise in building approvals has been followed by a fall in the following month, and vice versa.These wild swings have been driven by the volatile high rise apartments category, which jumped a remarkable 53.5% for the year to September.
This volatility is linked to the uneven nature of local government approvals which tend to be bunched towards the end of each quarter, especially the June end to the financial year and the December end to the calendar year.
Yesterday’s Bureau of Statistics figures showed trend approvals of 18,309 for September, up 6.8% from September last year, but down 6.4% from March’s peak of 19,567.
In other words, the boom is starting to flag and while the current level of approvals means a buoyant constriction sector well into 2016, the boom has gone and the economy will start getting less growth from construction than it has been getting in the past 18 months.
And that will be one of the factors for consideration at today’s board meeting of the Reserve Bank. The board and bank economists have to decide if a further rate cut will prolong the constriction boom, or really be a waste and rekindle the boomlet in established house prices in Sydney and Melbourne which is showing signs of ageing.
That cooling emerged strongly in yesterday’s CoreLogic RPData figures which showed capital city property prices increased by just 0.2% in October from September.
Prices across the country rose just 1.4% in the three months ending October (but fell sharply in Perth, down 2.8% in October and 2.5% for the quarter).
In Sydney, prices were up 0.3% over the month and 1.5% over the quarter, with Melbourne doing a bit better, up 0.6% for the months and 3.1% for the quarter. At the same time, auction clearance rates in Sydney and Melbourne are now at their lowest level for three years, according to Fairfax Media’s Domain Group senior economist Andrew Wilson. The clearance rate declined to an average 62.3% in Sydney (more than 80% a year ago) and 70.3% in Melbourne, with both seeing a surge of vendors trying to sell to beat the cooling market, but in reality depressing clearance rates.
