Summary: Home approval numbers fall 8.6% in July, slightly worse than expected figure; approvals up 21.5% on annual basis; “unwind of the pull-forward associated with HomeBuilder”; still 9% above average of 2018, 2019; follows “surge” in 2020, early 2021; house approvals, apartment approvals both down; non-residential approvals down 30.5%, residential alterations up 0.1% over month.
Approvals for dwellings, that is apartments and houses, had been heading south since mid-2018. As an indicator of investor confidence, falling approvals had presented a worrying signal, not just for the building sector but for the overall economy. However, approval figures from late-2019 and the early months of 2020 painted a picture of a recovery taking place, even as late as April of that year. Subsequent months’ figures then trended sharply upwards.
The Australian Bureau of Statistics has released the latest figures from July and total residential approvals fell by 8.6% on a seasonally-adjusted basis. The drop over the month was greater than the 5.0% fall which had been generally expected but smaller than June’s 5.5% fall after revisions. Total approvals increased by 21.5% on an annual basis, a deceleration from the previous month’s revised figure of 51.6%. Monthly growth rates are often volatile.
“The detail suggests this had more to do with a continued unwind of the pull-forward associated with HomeBuilder than the latest lock-down disruptions,” said Westpac senior economist Matthew Hassan.
Commonwealth Government bond yields moved higher on the day. By the close of business, the 2-year ACGB yield had gained 4bps to 0.30% while 10-year and 20-year yields each finished 6bps higher at 1.21% and 1.84% respectively.
ANZ economist Daniel Been noted approvals in July were still 9% above the average of 2018 and 2019 “though they are now closer to the 2018-19 average than the peak in March 2021.”
Westpac’s Hassan sounded a similar note. “Putting the update into some context, dwelling approvals posted a phenomenal 84% surge between last year’s COVID low and March as rebounds from last year’s disruptions combined with major stimulus from ultra-low interest rates and the Federal Government’s HomeBuilder scheme.”
Approvals for new houses decreased by 5.7% over the month after falling by 10.2% in June after revisions. On a 12-month basis, house approvals were 27.3% higher than they were in July 2020, down from June’s comparable figure of 47.0%.
Apartment approval figures are usually a lot more volatile and they fell by 14.0% after an increase of 4.5% in June. The 12-month growth figure dropped from June’s revised rate of 60.9% to 11.3% as the effects of large falls in mid-2020 fell out of the annual calculation.
Non-residential approvals dropped by 30.5% in dollar terms over the month and by 7.2% on an annual basis. Figures in this segment also tend to be rather volatile.
Residential alteration approvals increased by 0.1% in dollar terms over the month and were 30.9% higher than in June 2020.