Australian Bureau of Statistics (ABS) data released on Wednesday revealed that 447 homes (seasonally adjusted) were approved for construction in August, down by 9.4% and 13.6% when compared to last July and August, respectively – the lowest levels seen since October 2016.
This drop can be seen as a result of several factors, including declining home values, difficulty for buyers in accessing finance, and fewer people entering the country.
HIA Economist Diwa Hopkins hinted that the result is associated with the downturn in the new home building sector. “The new home building sector has been cooling modestly over the past year after reaching all-time high levels of activity during 2015 through to 2017,” she said.
Hopkins said that apartments are likely to lead the decrease in house building just as the segment’s construction pushed the increase in home building to record levels before.
For reference, approvals for units sank by 17.2% in August, a 23.7% decline from 2017.
It was also noted that other factors threatening the number of approvals include credit conditions and population growth.
“Constraints on the availability of finance through APRA and increased prudential constraints by banks are restricting investment in new homes,” Hopkins stated.
Population growth has also been tracking lower due to the implementation of stricter visa requirements last year. Consequently, migrants are discouraged from settling down in the country.
“As global economic conditions improve, skilled migrants who might otherwise consider immigrating to Australia could be more inclined to look to other similar advanced economies where entry requirements are less restrictive.”
On a positive note, the outlook for detached house building is better than for units, as the recorded drops are more minimal.
Figures showed that detached house approvals declined by 1.7% in August and are 4.2% lower in 2017.
“Total seasonally adjusted dwelling approvals in August fell across the eastern seaboard states: Victoria (-12.0%); Queensland (-8.4%), and; New South Wales (-2.7%). Tasmania experienced the largest monthly fall (-18.6%). Elsewhere approvals increased: Western Australia (+14.7%) and South Australia (+9.6%). In trend terms, total dwelling approvals in August increased by 1.5% in the Northern Territory and was virtually unchanged (up by 0.1%) in the Australian Capital Territory.”
