Building Approvals — July | By the numbers
- Total dwelling approvals (including the private and public sectors) on a seasonally adjusted basis fell by 9.7% in July to 12,944 (seasonally adjusted) against the median forecast for a flat outcome. Last month's 1.2% fall was revised to -0.8%.
- The decline in dwelling approvals over the year increased from -25.0% (revised from -25.6%) to -28.5%.
- Unit approvals were down by 19.6% in the month (prior rev: -2.5%) to 4,573 and by -43.5% on a year earlier (prior rev: -36.7%)
- Approvals for houses fell by 3.1% in July (prior rev: +0.4%) to 8,371 and are down by 16.2% over the year (prior rev: -14.5%).
- In trend terms, total dwelling approvals fell by 3.2% in July and by 24.0% over the year, with houses -1.0%m/m and -15.4%Y/Y and units -6.8%m/m and -35.0%Y/Y.
Building Approvals — July | The details
The total number of approvals at around 13,000 has fallen to the levels that prevailed between mid-2012 to mid-2013. House approvals at around 8,300 were at their lowest since April 2013, while units approvals at around 4,500 have weakened to a 7-year low. The 19.6% slump in unit approvals in the month was driven by a sharp decline from high-rise units in Sydney and Melbourne.
The available underlying data, which is not seasonally adjusted, indicates improving momentum from houses, and that could support a stabilisation in building approvals in the coming months. Housing market conditions and sentiment have been on the improve since May's federal election, with additional support from a lower RBA cash rate and APRA's changed guidance for less restrictive credit assessment criteria. Over the medium to long term, strong population growth should help to lift dwelling approvals from these low levels.
The state details were notably volatile in July and are shown in the table, below.
The fall in approvals over the past year has been experienced across the nation, as highlighted by the chart, below.
The value of alteration work to existing residential properties posted a 0.4% rise in July to $727m to be up by 4.8% over the year. In the non-residential category, the value of work approved slumped by 9.9% to $3.75bn, which largely offset a 10.5% gain in June, while a large base effect saw the annual pace swing to -18.6% from 25.8%, though the trend is positive.
Building Approvals — July | Insights
A volatile result in this update that was driven by the high-rise unit category. The weakness in approvals over the past year has now well and truly flowed through to residential construction activity, which contracted by 9.6% in year-on-year terms according to this week's Construction Work Done report for Q2. Ongoing weakness in approvals will mean residential construction will continue to be a headwind for the domestic economy, though there are tentative signs that a stabilisation will emerge in the coming months.