Private sector apartments suffer biggest decline, says ABS
The total number of dwellings approved in Australia fell 9% in November, reflecting an ongoing downturn in construction, according to new figures released by the Australian Bureau of Statistics (ABS).
The 9% fall, in seasonally adjusted terms, follows a 5.6% decrease in October, the ABS said.
“The result was driven by private sector dwellings excluding houses, which decreased 22.7%,” ABS head of construction statistics Daniel Rossi said. “Approvals for private sector houses fell by 2.5%. The November result is the third consecutive month of declines for total dwelling approvals, having fallen 21.7% since August.”
Across Australia, NSW led the decrease in total dwelling approvals at -18.4%, followed by Western Australia (-17.5%), Victoria (-12.7%), and Queensland (-5.6%). However, in Tasmania total dwelling approvals increased by 75.7% and by 10% in South Australia.
The November ABS building approval figures for Australia also showed that approvals for private sector houses fell across most states, with Victoria down -8.0%, WA (-6.1%), South Australia (-2.6%) and Queensland (-1.2%). In NSW, approvals rose 1.2% in November.
Rossi said the value of total building approvals fell 1.5% in November, following a 0.4 % decrease in October.
The value of total residential building approvals fell 4% – this included a 3.1% decrease in new residential building and a 9.2% decrease in alterations and additions.
“The value of non-residential building approved remained strong, increasing 2%, following a 2.3% rise in October,” Rossi said.
Looking at the yearly figures, the total number of dwellings approved fell 15.1%, seasonally adjusted.
When the ABS released its October building approvals report, showing a 6% decline in new home approvals, Westpac economist Ryan Wells said the downtrend was beginning to crystallise in response to the “numerous headwinds facing the sector and the broader economy”.
BIS Oxford Economics senior economist Maree Kilroy (pictured above), who analysed the latest report from ABS, said the 9% decline for dwelling approvals in November was a weaker than expected result.
“Renovation demand saw a substantial contraction, with the value of alterations and additions to residential buildings tapering 9.2% in November,” Kilroy said.
“The backlog of house and land sales made over 2021 helped stabilise approval volumes in 2022, but this will increasingly fade. A rising default rate on new land lot settlements and an increased flow of titled land to the secondary market is anticipated to become a more obvious drag in the coming quarters.”
Kilroy said a couple more rate hikes from the RBA are anticipated early this year, lifting the cash rate target to a peak of 3.6%.
“The combination of higher borrowing costs, falling house prices, and the increased cost to build a new dwelling set a negative backdrop for new dwelling supply,” she said. “With the return of overseas migrants adding to the underlying requirement for housing, pressure on the dwelling stock is expected to remain high, especially for rental properties.”
