April saw the third consecutive month of falling residential building approvals in Australia, according to the latest round of research from the Australian Bureau of Statistics. Their data shows that totals, seasonally adjusted, fell by 5.6%. Detached house sales were essentially flat in the month, with a barely-noticeable 0.1% fall. Approvals for other types opt dwelling fell by 13.5% month-on-month and were down 17% from a year earlier.
However, it’s important to note that other indicators were substantially higher than this time last year – detached house sales are still 16.1% higher than a year ago, for instance, and sales as a whole may be lower, but they’re falling from their January maximum when they were higher than they have been for a decade.
Looked at by region, seasonally adjusted building approvals actually increased in Victoria by 14.8%, in South Australia by 12.2%, and in Western Australia by 4.4%. By contrast New South Wales saw a fall of 22.8%, Queensland prices fell 20.2% and Tasmania saw a 10.4% decline.
Australia’s Housing Industry Association (HIA) insists there’s no reason to worry, though.
‘The monthly volume of building approvals in April 2014, continued to recede from the decade high achieved back in January, although with close to 15, 000 dwellings approved in the month it is still a very positive result,’ said HIA economist Gordon Murray.
‘The pace of building approvals late in 2013 and early 2014 moved well ahead of the pace of home building commencements. So while we have seen building approval activity moderate over recent months, the pipeline of residential building work already approved should sustain a historically high level of activity throughout the middle part of 2014,’ Mr. Murray went on to say.
The evidence is there to back up Mr. Murray’s claims – that the Australian housing market may be correcting, but that’s not a euphemism for ‘crumbling.’ Lending for new home building continues high, and actually rose in April to reach the highest level since 2010, bearing out Mr. Murray’s expectations that the backlog of approved homes still in the pipeline should assure adequate supply.
It’s also beginning to look as if many habitual renters in Australia might be in a position to buy. Vacancy rates in rented accommodation are lower than usual when seasonally adjusted, according to data from SQM research, meaning that while more homes should come on the market in 2014, 2015 and 2016 this won’t necessarily help landlords. Instead many people will make the switch to purchasing property.
There’s one factor adding buoyancy to the Australian market that we haven’t touched on yet: the Australian population is rising. Data provider Timetric said in a statement, ‘a growing population and improving economic and social conditions have led to a rising demand for new homes. The market is set to grow at an annual rate of around 7% in nominal terms up to 2018.’
What will happen to the Australian property market as residents head to the cities – from Australia and overseas – is hard to predict. But a slow-down in the homebuilding rate isn’t the first crack in Australia’s new walls. It;’s the sign of a healthy market adjusting.