No sign yet of interest rate bounce in building approvals

“Hopes of a bounce in the home building market following the RBA’s June interest rate cut were tempered today with the release of results for June 2019 showing a 1.3% decline in the number of approvals for new home building – the nineteenth consecutive month of reduction,” Master Builders Australia Chief Economist Shane Garrett said.

“There had been a procession of good news over recent months with a conclusive outcome to the federal election, two interest rate reductions and the passage of income tax cuts in Parliament,” he said.

“There is no sign so far that that we are yet at a turning point in the new home building cycle. Today’s figures seem to indicate that momentum in the market is still downward due to falling house prices and still fragile consumer confidence,” Shane Garrett said.

“The fundamentals of the market are still strong, with employment and population growth rates the envy of many other countries. It will take time for these positives to translate into growth in the housing market,” he said.

“Australia needs about 200,000 new homes built each year over the coming decades. Today’s figures mean that we are falling further short of this crucial threshold with an increasing risk of us underproviding for our housing needs. Barriers to the supply of new home building like taxes, land shortages and inadequate infrastructure provision need to be tackled with great urgency,” Shane Garrett said.

During June 2019, the volume of approvals for new dwellings saw the largest reduction in the ACT (-4.7%), followed by Tasmania (-3.8%) and Western Australia (-3.5%). There were also reductions in New South Wales (-2.9%) and South Australia (-0.8%).

Approvals did see growth in some markets during June 2019. These included the Northern Territory (+5.8%), Victoria (+0.4%) and Queensland (+0.2%).