The Australian Bureau of Statistics (ABS) has released its latest Building Approvals data, reporting an 8.1 per cent slide in residential dwelling approvals (seasonally adjusted terms) in October, following on from a 7.3 per cent increase in September.
The decline was spurred by declines in both unit and house approvals, which fell by 10 per cent and 6.8 per cent, respectively.
Maree Kilroy, economist at BIS Oxford Economics, wasn’t surprised by the figures, noting the continued lag in the supply of housing, despite the touted rebound in market sentiment.
“Despite the recent recovery in residential property prices, it is not until June quarter next year that an upturn in approvals is anticipated to kick through,” she said.
However, according to Property Council CEO Ken Morrison, the sharp slide in approvals over the month of October should raise alarm bells for policymakers.
“While a lot of attention is being paid to the recent recovery in housing prices, the story with the big impact on jobs and GDP is the continued decline in housing approvals,” Mr Morrison said.
“Housing construction is a key driver for the economy, and it has been slowing down significantly. As the ABS notes, this was the 23rd month where dwelling approvals had fallen.
“This matters for jobs in the housing construction industry and the economic activity they support.”
Mr Morrison claimed that a supply and demand imbalance could exacerbate housing affordability pressures.
The Property Council CEO called on policymakers to consider planning reforms to incentivise housing construction and noted the importance of reducing barriers to housing credit.
“Our growing population needs housing, and governments need a laser-like focus on their planning regimes to ensure that we can bring new housing to the market where and when it’s needed,” he added.
“We also need to ensure that prospective home buyers can access housing finance in a timely and efficient way.”
Despite Mr Morrison’s concerns, ANZ Research expects dwelling approvals to “find a base” in the medium term and supply catches up with growing demand.
“October’s drop was a bit bigger than September’s increase, but not by enough to change our view that approvals are finding a base,” ANZ Research noted.