Building approvals fell sharply in January thanks to the impact of the Covid Omicron variant slowing the approvals process at local and metro governments.
Economists said the semi-lockdowns and restrictions allied with the normal summer holiday break impacted activity at many local councils.
Approvals fell sharply – more than 40% – for ‘other dwellings’ (apartments, units, townhouses) but there was also a big slide in owner-occupied approvals.
The Australian Bureau of Statistics (ABS) said January building approvals slumped 27.9% from December (when they rose) to 12,916 properties.
That’s just above the June 2020 level which was in the depths of the first pandemic’s lockdowns when approvals totalled 12,724.
Private housing approvals fell 17.5% to 8,712, while other dwellings tumbled 43.6% to 4,007 (which was the lowest monthly figure in more than a decade.
Private dwelling approvals had soared thanks to the federal government’s (and some state government) Homebuilder support package for first home buyers especially and renovations.
Those approvals peaked in April 2021 at 15,250. The fall since then is a massive 43%.
This though is a very volatile part of the approvals series and depends heavily on the speed with which councils process what are often quite large and complex applications compared to single building private dwellings.
Total approvals did jump 8.2% in December reflecting a strong rise in the more volatile “other dwellings” category, while private sector house approvals again eased in the month.
The ABS said that the value of total building approved fell 27.7% in January, in seasonally adjusted terms. The decrease was driven by a fall in the value of non-residential building approved (-36.8%), following a 15.0% decline in December.
The value of total residential building fell 22.8% with that fall made up of an 24.9% drop in the value of new residential building, and a 10.3% fall in the value of alterations and additions.
If approval rate spick up in February and March then we will know the suggested reason for the large slide of Covid Omicron probably holds true. But if there is little improvement then it looks like the home building sector is turning lower again.
But there were signs of a pickup in construction activity in February after omicron’s disruptions in January.
The Australian Industry Group/Housing Industry Association performance of construction index rose 7.5 points to 53.4 in February, indicating the sector is again growing with a score above 50 points.
Wednesday’s December quarter national accounts revealed that dwelling investment declined 2.2% in the three months “despite high levels of dwelling approvals in recent quarters, according to the ABS.
The reality is that since the peaks in march (for total approvals) and April (for private houses) approvals have been falling and that will set up a further fall in investment as 2022 progresses (given the long lead times between approvals, finance being fixed and building starts).
