A fall in building approvals at the end of 2022 is the next step in what has been a very well-broadcast downturn in the housing market caused by the increase in the cash rate according to HIA Economist Tom Devitt. Source: Timberbiz
The Australian Bureau of Statistics released its monthly building approvals data for November for detached houses and multi-units covering all states and territories.
“Building approvals fell by 9.0% in the month of November, including a 2.4% decline in detached approvals and a 19.9% decline in multi-units,” Mr Devitt said.
“This puts detached approvals over the three months to November down by 12.1% on the same quarter in 2021, and multi-units down by 11.4%.
“Within two months of the RBA’s first interest rate hike in May 2022, leading indicators of building activity including new home sales started to decline. Investors, first home buyers and owner-occupiers started retreating from the housing market.”
Mr Devitt said this week’s suggested that builders have worked through much of the large pipeline of work that existed in May 2022, when the RBA started increasing the cash rate.
He said this would result in a slowdown in the number of homes under construction in 2023.
“The full impact of the 2022 increases in the cash rate will not be observed until the second half of 2023,” he said.
“The depth of this downturn will be determined by the RBA’s cash rate decisions. The RBA has already undertaken the steepest hiking cycle in a generation and it needs to hold fire on further hikes to give their actions to date time to play out.
“As more housing market indicators reflect the impact of cash rate increases to date, the RBA will be under increasing pressure to reverse course in the second half of this year,” Mr Devitt said.
In seasonally adjusted terms, total building approvals by state were mostly down in the three months to November compared to the same quarter in 2021, with the declines led by Western Australia (-27.4%), followed by Queensland (-16.8%), New South Wales (-12.0%), and Victoria (-6.6%), with South Australia seeing the only increase (+6.2%). In original terms, total building approvals increased in the Northern Territory (+29.0%) and Tasmania (+7.8%), while declining in the Australian Capital Territory (-34.8%).
