The faint signs of recovery in the Australian home building market seem to have disappeared once again with the news of a sharp drop in March approvals, thanks to a slump in flats and home units.
The Australian Bureau of Statistics reported yesterday that building approvals fell 11.4 per cent to 11,752 units in March,seasonally adjusted, from a downwardly revised 13,257 units in February (up 9.0 per cent on January) while in the year to March, they were down 9.6 per cent.
Most analysts had been looking for an increase’ most of which would come from non-housing approvals for flats and units.
That was not to be as the ABS reported that:
“The seasonally adjusted estimate for total dwelling units approved fell 11.4% in March 2007, which follows a 9.0% increase in February 2007.
“The seasonally adjusted estimate for private sector houses approved rose 0.1%, to 8,422, in March 2007.
“The seasonally adjusted estimate for private sector other dwellings approved fell 29.2% in March 2007 following a revised increase of 25.6% in February 2007.
“The seasonally adjusted estimate for the value of total building approved fell 3.7%, to $5,471.5m, in March 2007.
“The seasonally adjusted estimate for the value of new residential building approved fell 3.4%, to $2,805.6m.
“The seasonally adjusted estimate for the value of alterations and additions fell 2.0%, to $464.6m.
“The seasonally adjusted estimate for the value of non-residential building fell 4.5%, to $2,201.3m.’
All this means that the small signs of a recovery seen in the housing approvals in January and especially in February have all but been snuffed out.
There may have been a small 0.1% rise in approvals for housing but that was minor with the sharp decline in flats and unit approvals.
That fall would square with anecdotal commentary from some broking analysts that the rise in units and flats in February in particular, was due to some one-off approvals being delayed by Christmas-New Year and the January shut down and getting through the system slowly.
Meanwhile home builder AV Jennings has reported a 20 per cent boost to net profits in its latest six month results but won’t be rewarding shareholders with an interim payout because of the weak conditions in the housing market.
“The Directors have decided that the Company will not pay an interim dividend in consequence of the subdued result for the interim period. They anticipate a return to dividend payments in future periods.” But were no more specific
Net profit rose to $9.03 million for the six months to March 31 from $7.494 million for the prior corresponding period and revenue rose to $258.987 million compared to $226.459 million for the corresponding six months of 2006.
The culprit for the ‘subdued result’ was again NSW. Jennings directors have singled out the state’s sluggish housing market for special mention before.
There was more again yesterday:
“The Company’s sales performance in all states has been satisfactory, with the exception of New South Wales.
“In this state, the growth in government charges has severely impacted affordability and market activity.
“In addition, the New South Wales housing activity has been further dampened by limited land releases and protracted development approval processes.
“There is no evidence that this will change in the short term.”
As a result of the problems in NSW Jennings has 75 per cent of its development land in Victoria and Queensland
The said second half results “improved significantly over the results of the first six month period. Contract signings for the second six month period have increased by about 22% over the first six month period and are 14% higher than for the same 12 month period last year. Turnover for the second six month period is up 21% on the corresponding first six month period.
“The Company has a high level of presales that should be recognised in subsequent reporting periods. Margins have increased to 20% from the 17% margins achieved in the first six month period. However, they remained below the 25% margins of the previous 12 month period”
Rival Australand also singled out NSW (and Queensland and Western Australia) as being states where housing affordability was tough and looking to stay that way. For that reason Australand told the AGM in Sydney that it was planning to move more into shopping centre and other related developments and the creation of funds under management, thereby further reducing its involvement in housing.
AV Jennings reminded the market that it has changed its year end to June 30, which has extended its 2007 reporting year to a 15 month period. The Company will therefore be announcing its full financial year end results following June 30, 2007.
