The volume of new house approvals remains around its lowest level in a decade as the full impact of RBA rate hikes continues to hurt households, according to HIA Senior Economist Tom Devitt. Source: Timberbiz
The Australian Bureau of Statistics released its monthly building approvals data for September for detached houses and multi-units covering all states and territories.
The number of new houses approved in September fell by 4.0% for the month. This leaves approvals of new houses in the last three months 13.9% lower than the same quarter last year,” Mr Devitt said.
“Building approvals continue to be weighed down by the fastest increase in interest rates in a generation.”
Mr Devitt said commentators had suggested that the inflation figures released last week justified further rate hikes.
However, he said that this perspective failed to appreciate that leading indicators such as building approvals were only now starting to reflect last year’s rate hikes. Further declines were expected as the full impact of this year’s rate hikes flow through to households.
“These low approvals figures will produce a decade low volume of new housing starts in 2024 and it will be even longer before this slowing in activity emerges in lagged indicators such as unemployment and inflation,” Mr Devitt said.
“There are very long lags in this cycle due to the record high volume of building work that was in the pipeline when the RBA first raised rates in May 2022. The volume of houses under construction only started declining in the June quarter of 2023, and remains elevated, a year after the first increase in the cash rate.”
He said that this large volume of building work had obscured the impact of the rate rises on the broader economy, especially unemployment, as the building industry employed more than one million Australians.
“This slowdown in the volume of approvals will make it increasingly difficult to reach the Australian government’s target of building 1.2 million new homes in five years,” Mr Devitt said.
In seasonally adjusted terms, decreases in house approvals in September were led by Western Australia (-12.8%), followed by Victoria (-9.3%) and South Australia (-3.0%). Increases were seen in Queensland (+1.2%) and New South Wales (+0.9 %). In original terms, declines were also seen in the Australian Capital Territory (-11.8%) and Tasmania (-2.4%), while the Northern Territory increased by 56.0%.
