Make no mistake; the home building sector is being crunched, especially in Queensland which was one of the strong performers up to earlier this year.
In news that will please the Reserve Bank and upset its critics, activity in the Australian home building industry dropped in March, driven by a sharp fall in new house approvals.
The RBA board meets next Tuesday and barring a surge in retail sales figures for March, won’t move interest rates.
Australian Bureau of Statistics figures show that total dwelling approvals fell 5.7% in seasonally adjusted terms, while approvals for private sector houses fell almost 6%, led by a sharp drop in Queensland.
The value of the approvals was down 6%; the value of alterations and additions plunged 7% in the month – a worrying sign because consumers usually switch to renovations when they are worried about house prices or selling or buying their homes.
The figures show that total dwelling approvals fell by 4.1% in Queensland to lead the country, followed by falls in other states. There was an 8.4% rise in the Northern Territory. It’s suggested the floods and wet weather in Central Queensland and along the coast may have had an impact on activity in that state. Easter also fell early.
New home approvals were down in most states but up slightly in NSW and Victoria.
It confirms that there are no inflationary pressures coming from housing, which has been a traditional source of concern in the past. The housing and home building industry generally is very sluggish, to recessed in some areas.
The sharp fall follows rate rises in February and March and the instability on markets in both months that battered consumer confidence to 15 year lows.
Figures from the Australian Bureau of Statistics show that the seasonally adjusted estimate for total dwelling units approved fell 5.7% in March following a revised fall of 0.8% in February.
That was far worse than the market had been suggesting: the forecast from economists was for a fall of 1%.
The fall is even greater than it seems: February was originally estimated at a rise of 0.1%, but this morning the ABS said it had been revised down to a fall of 0.8%, continuing the trend seen in January.
The ABS said the seasonally adjusted estimate for private sector houses approved fell 5.8% in March following a revised increase of 1.2% in February.
In a tiny bit of good news, there was a 0.3% rise in the number of private sector other dwellings (units and flats) approved in March.
In March the seasonally adjusted estimate for the value of total building approved fell 0.1%, the seasonally adjusted estimate for the value of new residential building approved fell 6.0% and the seasonally adjusted estimate for the value of alterations and additions fell 7.0%
The ABS said the value of non-residential building rose 8.9%, but nowhere near enough to offset the sharp fall in private home.
These figures confirm the private credit numbers from Wednesday from the Reserve Bank which showed a 0.8% rise in the month for housing credit, an annual rise of 11.2%, the lowest increase for a decade, and continuing the slowing growth trend evident from midway through last year.
Once again it was investors who drove the slower growth rate: growth in the value of loans for investor property fell to an annual rate of 9.5% after it rose 0.5% in the month (0.6% in February). That was well down from the 10.1% annual rate in February.
Owner-occupied credit rose at an annual rate of 12% in the year to March (12.1% the month before) after rising 1.0% in the month (unchanged). That’s a sign that much of the housing action is happening in the existing home market.
Even though Westpac produced a 10% rise in cash earnings to $1.839 billion (after doubling its bad debt provisions) yesterday, news of the slide in building approvals is bad news for the banks because it shows demand for new home loan building approvals is falling.
The building industry won’t like it and the Housing Industry Association was forecasting a fall in activity earlier in the week, and it said yesterday that new home sales in March fell by 6%.
Earlier in the week in a preview of these figures, Goldman Sachs JBWere economists said "Looking further ahead, we have generally become more bearish on the outlook for residential construction and do not anticipate a meaningful lift in activity this year". Good call: perhaps now push that out into 2009.
Later today March retail trade figures are released and are expected to reveal a small rise. But after the surprising nosedive in housing approvals, that outcome may not be as certain now.
Across the Tasman and housing is in the news as building consents (approvals) tumble.
That’s got people in business and the government worried about just how far the NZ economy will slide.
The Kiwi dollar hit a three month low Wednesday before rising off the back of the Fed’s rate cut early yesterday. The rise doesn’t disguise the sense of concern in New Zealand, with some commentators speculating about a recession.
According to Statistics NZ, building consents fell by nearly a third in March compared to March 2007.
The official figures show that In March this year consents were authorised for 1567 new units, a decrease of 702 units or 31%, compared to a year ago.
Apartment consents fell from 190 in March 2007 to 50 last month and excluding apartments, 562 fewer new dwellings were authorised last month, a fall of 27% compared with March 2007.
Seasonally adjusted new dwelling authorisations fell 9.1% last month compared with February, continuing the easing trend that started last June as interest rat
