Thursday’s release of January building data by the Australian Bureau of Statistics (ABS) included a 10-year low for new private housing approvals, and we won’t have to wait long for some insight into why this might be.
Some media reports suggested that buyers pulled out of the market in the face of rising interest rates and soaring construction costs, but this afternoon’s housing finance will show that it’s the bank-driven refinancing boom that is soaking up lending, not new buyers or owner-builders.
“Approvals for private sector houses fell by 13.8 per cent, the fifth consecutive drop, to be the lowest result recorded since June 2012”, the ABS reported.
The number of standalone home approvals dropped 13.8% in January from December to a seasonally adjusted 7,664, the lowest monthly total since June 2012.
Approvals for private sector houses fell in all states: Western Australia (-18.7%), New South Wales (-17.3%), Queensland (-16.6%), Victoria (-9.9%) and South Australia (-2.8%).
December housing finance data showed the refinancing boom had accounted for more than 60% of all home loans in that month as banks offer cash signing bonuses to switch, or remain with their current lender.
Banks want to sign up existing mortgage holders because in most cases they have good repayment track records, jobs and evidence of substantial buffers to withstand a rate rise.
While that is also impacting non private dwellings, the usual confusion at local government levels about delays and other problems continued to impact approvals for new units, apartments and townhouses.
That saw a 40.8% fall in approvals in January after the 41.9% surge in December.
Overall, the total number of dwellings approved fell 27.6% in January (seasonally adjusted) after December’s end of year 15.3% increase.
Across Australia, total dwelling approvals decreased in New South Wales (down an improbable 49%), Victoria (down an equally astounding 38.6%), Tasmania (down 31.7% – it’s a small market), WA (down 7.9%) and South Australia (down 6.5%).
Only Queensland recorded an increase (+25.6%) which the ABS said was “driven by apartment developments approved in January.”
The ABS said the value of total building approvals fell 18.6% after 1% rise in December.
The value of total residential building approvals fell 13.6%, made up of a 15.1% decrease in new residential building and a 4.0% fall in alterations and additions.
It should be pointed out once again that this series is volatile with big swings every month or so but the falling trend in housing approvals has been clear since HomeBuilder subsidies ended in March, 2021 when total approvals surged to more than 23,000.
Private houses peaked at 14,254 in the same month and have now fallen more than 46%.
This will be bad news for jobs and building products companies later this year and into 2024. They had better hope the government infrastructure spend continues at current levels.
