Originally published by AMP Capital
Australian dwelling building approvals rose 0.4% in August with units up 2.3% but houses down 1.1%. Total approvals are down 15.5% on a year ago.
Building approvals peaked a year or so ago and point to a fall in dwelling construction over the next 6-12 months. A gradual declining trend in new home sales based on HIA data (up 9.1% in August but after a 15.4% fall in July) also points to slowing dwelling construction ahead.
However, the decline is likely to be gradual and modest at this stage as approvals have stabilised at a relatively high level so far this year. A rise in the residential crane count according to the Rider, Levett, Bucknall Crane Index over the six months to September led by Sydney also tells us that there is still a large pipeline of work yet to be done on the apartment front that will see dwelling construction remain at a high level for a while yet.
Meanwhile evidence is continuing to mount that the Sydney property market is cooling down with price growth virtually stalling over the last quarter and prices actually falling slightly in September consistent with a sharp slowing in auction clearance rates. A further slowdown is likely over the next year or so. The Melbourne property market has held up so far reasonably well but is also likely to slow as the supply of units hits but the impact is likely to be moderated by strong population growth in Victoria. Meanwhile, home prices in Perth look to be at or close to bottoming and moderate growth is likely to continue in Adelaide and Brisbane. Hobart is currently the star performer with dwelling prices up 14.3% year on year as buyers search for value after the surge in Melbourne prices.
Implications for interest rates: a gradual decline in dwelling construction as opposed to a collapse is consistent with the RBA eventually moving to raise interest rates, but that’s still a way off yet.
Please feel free to give me a call if you wish to discuss.