01/09/2009 - 10:05

WA building approvals fall 3.3% in July

01/09/2009 - 10:05

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Building approvals in Western Australia have bucked the national upward trend, falling 3.3 per cent in July, new figures show.

Building approvals in Western Australia have bucked the national upward trend, falling 3.3 per cent in July, new figures show.

The Australian Bureau of Statistics said building approvals declined from 1,833 units, seasonally adjusted, in June to 1,772 units in July.

In the year to July, approvals jumped 30.3 per cent from 1,360 units.

Nationally, approvals rose by 7.7 per cent to 12,048 units in July from an upwardly revised 11,190 units in June.

In the year to the end of July, building approvals fell 3.9 per cent.

Although down slightly from the 9.9 per cent improvement recorded the previous month, the July result was the second straight monthly rise and well above market forecast of a 3.3 per cent increase.

Commonwealth Bank of Australia chief economist Michael Blythe said there have been signs "for a while now" that the residential building cycle was turning.

"We've seen it in the finance numbers, we're now seeing it in the leading indicators of residential construction so it is an encouraging sign for the durability of the upturn that we are seeing," Mr Blythe said.

"It reinforces the idea that that part of the economy has turned around and turned around pretty decisively.

"Residential construction has a pretty big direct impact on the economy, and some big second round effects as well, so it is certainly an encouraging sign."

The July result was underpinned by a 35.3 per cent lift in approvals for "private sector other dwellings" category, which includes apartments and multi-unit dwellings.

Approvals for private sector houses rose 1.5 per cent.

In the year to July, building approvals fell 3.9 per cent.

Mr Blythe said the data reflected the impact of low interest rates and the first home owner's grant on housing activity.

"That is a pretty powerful combination," Mr Blythe said.

The Reserve Bank of Australia's (RBA) cash rate has been at a 49-year low of three per cent for the past four months and the central bank is widely tipped to leave it unchanged at Tuesday's monthly board meeting.

In October last year, the federal government increased the first home owner grant to $21,000 for those who purchased a new home or who chose to build their own home.
The temporary boost is due to be reduced to $14,000 from October 1 this year.

National Australia Bank senior economist Spiros Papadopoulos said the strong rise in building approvals during July continued to show the resilience in the local housing market.

Building approvals have risen in six of the first seven months of 2009, ABS data showed.

"It is just maintaining the solid upward trend in building approvals," Mr Papadopoulos said.

"It is just reaffirming the Reserve Bank's belief that the new housing market is in pretty good shape."

Mr Papadopoulos said July's result reaffirmed recent strength in new homes sales.

Data from the Housing Industry Association (HIA) released on Monday said new home sales rose 0.1 per cent in July following a 0.5 per cent gain in June.

"We saw new home sales rise in the HIA data yesterday," he said.

"Obviously the first home buyer is still very attractive in that market with the first home buyers grant.

"The building approvals is just confirming the recent trend in the housing market."

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