Building sector won’t feel market buzz until 2020

The latest Building Approvals data from the Australian Bureau of Statistics has revealed that, in seasonally adjusted terms, dwelling approvals fell 4.7 per cent in April, driven by a 6.5 per cent drop in apartment approvals and a 2.6 per cent drop in detached housing approvals.   

When assessed year-on-year, dwelling approvals have declined by 24.2 per cent, with apartment approvals falling 28.8 per cent, and detached housing approvals dropping 20.5 per cent.  

According to Maree Kilroy, economist at BIS Oxford Economics, the slide will continue throughout 2019.

Ms Kilroy added that the recent lift in market sentiment off the back of political and regulatory developments would not flow through to the construction sector until 2020.

“Recent developments, such as APRA proposing to ease their mortgage serviceability guidance, the RBA signalling rate cuts, the First Home Loan Deposit Scheme and the surprise federal election result, should lift confidence and open up credit availability, helping to put a floor under house price declines,” she said.

“However, we do not expect this stimulus to flow through positively to new construction until 2020.”

The chief economist of the Housing Industry Association, Tim Reardon, also expects the slowdown in building approvals to continue, adding that reversal in the trend would only come off the back of further changes to home lending guidelines.

“The fall in approvals in April were most likely influenced by low levels of consumer confidence during the federal election; however, the end of the election alone will not be sufficient to bring stability back into the housing market,” Mr Reardon said.

“An easing of the credit squeeze is necessary to alleviate the adverse impact of the housing downturn on the wider economy.”  

[Related: FHB activity surging in anticipation of rate cut]