In July, Western Australia experienced the biggest fall in housing approvals in four years, falling by 19.9 per cent, in a sign the state is likely to follow national trends of a property market downturn, according to CommSec's Martin Arnold.
In July, Western Australia experienced the biggest fall in housing approvals in four years, falling by 19.9 per cent, in a sign the state is likely to follow national trends of a property market downturn, according to CommSec's Martin Arnold.
In an economic research note released today, Mr Arnold said the big question was how long the current commodity market could sustain Western Autralia's elevated levels of housing growth.
The sentiment was echoed by the Housing Industry Association regional director Sheryl Chaffer, who said the decline in the level of approvals is likely to be exacerbated given the extremely low levels of housing affordability.
"The interest rate hike earlier this month is likely to serve to cause a further deterioration in the volume of building approvals over the coming months." Ms Chaffer said.
Nationally, building approvals rose by 0.4 per cent to 12,980 units in July, seasonally adjusted, from a downwardly revised 12,925 units in June, the Australian Bureau of Statistics revealed today.
In the year to July, building approvals slipped by 7.5 per cent.
Economists had expected a two per cent fall in July.
ANZ senior economist Ange Montalti said the latest building approval numbers were unlikely to ease housing pressures, as shown by rising rents and higher house prices.
Mr Montalti said last month's quarter of a percentage point interest rate rise would punish the housing market.
"As a consequence, the gap between completions and underlying demand is projected to rise to record levels over the next few years, creating a shortage equivalent to almost one year's demand by 2009," he said.
But Commonwealth Bank of Australia senior economist Michael Workman said rising demand for rental accommodation would spur an improvement in building activity in 2008.
"The strong underlying fundamentals of firm jobs, population and income growth and low vacancy rates are expected to drive the gradual rise in national dwelling construction in 2008," he said.
The volatile other dwellings sector, which includes apartment buildings, fell by 6.5 per cent in July to be 25 per cent lower than a year earlier.
Private dwellings were up 0.7 per cent in July but were 1.9 per cent lower on an annual basis.
Victoria was the only state to record building approvals growth in July, with a seasonally adjusted rise of 15.3 per cent.
St George Bank treasury economist Amanda Tan said higher construction costs, land supply constraints and upside risk to interest rates were stopping housing supply growth from gaining traction.
The full text of Ms Chaffer's announcement is pasted below
Building approvals in Western Australia weakened at the start of the new financial year.
Figures released today show that dwelling approvals dropped by 19.9 per cent in July to a total of 1,732. Approvals were also well down on the same time last year, decreasing by 17.4 per cent.
Approvals for detached houses were softer in July, down 4.8 per cent to a total of 1,477. Detached house approvals were also well down on the same time last year, with a drop of 15.6 per cent.
Multi-unit approvals fell by a staggering 58.1 per cent in July, but to some extent this marks a correction of the strong level of approvals recorded in the previous month. Multi-unit approvals were 16.5 per cent lower when compared to July 2006.
Australia's peak building industry body, HIA, said that Western Australia is currently in the midst of the downward cycle in the volume of dwelling approvals, following a boom period in housing.
HIA's Regional Director WA, Ms Sheryl Chaffer, said that the decline in the level of approvals is likely to be exacerbated given the extremely low levels of housing affordability.
"The interest rate hike earlier this month is likely to serve to cause a further deterioration in the volume of building approvals over the coming months." Ms Chaffer added.
The monthly trend in building approvals in July fell by 4.5 per cent in Tasmania, 2.3 per cent in New South Wales, and 1 per cent in the Northern Territory. Approvals were effectively flat in South Australia (+0.2 per cent) and Queensland (+0.3 per cent). Building approvals were up by 2.6 per cent in Victoria and 10.9 per cent in the Australian Capital Territory.
