The latest figures from the Australian Bureau of Statistics (ABS) have revealed that, in seasonally adjusted terms, residential building approvals dropped by a substantial 9.4 per cent in August this year, and by 13.6 per cent when compared with the same month in 2017.
For those who like to watch the property market closely, the market segment that recorded the largest drop was new apartments, where building approvals fell 17.2 per cent in August. This represented a year-on-year drop of 23.4 per cent when compared with August 2017. The ABS reported that approvals for standalone houses showed a gentler drop of 1.9 per cent in August and 4.4 per cent year-on-year.
Whilst any fall in building approvals is never good news for the overall economy, this trend is particularly concerning when you consider the rate that our population is growing, as we pointed out in OUR POST LAST MONTH.
Interestingly, an analysis of this data by economists at the ANZ Bank has revealed that unlike past falls in housing approvals, this latest drop has been driven by a tightening of the credit market rather than the usual lifting of interest rates.
If this proves to be the case, then we see this trend continuing for some time to come. A Senior Economist at the ANZ has been quoted as saying, “If we assume no easing of the credit tightening until at least after the royal commission delivers its final report in February 2019, then it seems reasonable to expect that dwelling approvals could be off as much as 15–20 per cent in trend terms by early next year.”
In the longer term, it is worth remembering that any fall in residential construction will cause an even lower level of supply of housing in a market where demand continues to grow as a result of an increasing population…Concerns about the affordability of housing look likely to continue.
If you have questions about how your own local property market is been performing, or you are wondering how to maximise the price you achieve when you sell in the current market, don’t hesitate to give the team at Ian Reid Vendor Advocates a call on 9430 0000. You can also get a FREE copy of our booklet, Fatal Real Estate Traps Exposed, while you’re here on our website.