Hard on the heels of the Reserve Bank’s decision to leave interest rates steady, further evidence of why that inaction will be with us perhaps well into 2020.
Dwelling approvals from the Australian Bureau of Statistics (ABS) fell a seasonally adjusted 9.4% in August, driven by a sharp 18% decline in apartment approvals. They are down 23.7% in the year to August on a seasonally adjusted basis, or a still heavy 15% on a trend basis.
Owner-occupied house approvals also fell but only by 1.7% in August, to be down 4.4% in the year to August, seasonally adjusted, and 3.4% on a trend basis.
In other words, despite all the angst and silly stuff that has been written about falling house prices and a property price crash, the largest area of investment (and approvals), owner-occupied housing remains solid, even if the strength is fading a little.
Reserve Bank data confirms that – in the year to August, lending for owner-occupied housing was up a solid 7.5%, while that for investment housing had fallen to just 1.5% (which is why there is a lot of silly stuff being written as the authors ignore the still solid demand for home loans from owner-occupiers).
As well car sales continued to weaken in September according to industry sales data released yesterday.
National vehicle sales for September reached 94,711, down 5.5% from September 2017 and down 510 units from August 2018.
Victoria, South Australia, and New South Wales led the fall in August building approvals while approvals rose in trend terms in Western Australia, Tasmania, Northern Territory and the ACT. Approvals were flat in Queensland.
The AMP’s Chief Economist, Dr Shane Oliver said in a comment yesterday “The emerging downturn in the dwelling construction cycle is another reason why we expect the RBA to leave rates on hold at least out to 2020 and why there is still a significant risk that the next move in rates may still turn out to be down and not up.
“While the fall in apartment approvals was driven by Victoria and they are prone to volatility anyway, the broad downtrend in dwelling approvals looks to have resumed.
“This is consistent with a peaking in residential cranes and along with a declining trend in alterations and additions points to a weakening in housing construction activity ahead.
“A further softening is likely as new supply hits the property market putting downward pressure on property prices which will likely reinforce a slowdown in apartment construction. The trend in the value of non-residential building approvals also remains down.”
In trend terms (which smooth out the volatility of the seasonal adjustment process) the number of dwellings approved in Australia fell 1.9% in August 2018, according to Australian Bureau of Statistics.
“The fall was mainly driven by private dwellings excluding houses, which decreased by 2.7 percent in August,” Justin Lokhorst, Director of Construction Statistics at the ABS said in yesterday’s release. “Private sector houses also fell, by 1.2 percent.”
The value of total building approved fell 1.3% in August, in trend terms, and has fallen for nine months. The value of residential building fell 0.8% while non-residential building fell 2.3%.
