New home approvals down 11% in April with big drop in WA: ABS

Building approvals for private sector houses fell 11.1% in April to 6,590 on a seasonally adjusted basis, according to the latest ABS figures.

Unit approvals fell 2.3% over April to 3,656 leaving overall dwellings approvals down 8.7% following a rise of 6% in March.

The value of residential building fell 6.7% while non-residential building fell 2.8%, according to the ABS.

The biggest monthly private sector housing fall was recorded in Western Australia, where the number of approvals fell 36.7%, followed by South Australia (-26.4%) and Queensland (-11.6%).

Private sector house approvals rose in New South Wales (2%) but were flat in Victoria.

For the year to April, private sector housing approvals are down 15.9% while unit approvals are down 33.8%

Dwelling approvals decreased in April in Western Australia (-46.7%), South Australia (-27.8%), New South Wales (-15.3%) and Queensland (-2.7%), but increased in Victoria (13.0%) and Tasmania (9.6%) in seasonally adjusted terms.

The value of total building approved fell 5.4% in April in seasonally adjusted terms, and has fallen for three months.

Westpac suggested the April WA result has been heavily impacted by the introduction of new building approval legislation in Western Australia which appeared to have created a hole in approvals presumably due to a lengthier approval process.

"That will be a temporary hole with normal transmission resuming in coming months," it noted.

It also suggested the picture across the other states showed volatile moves mostly associated with a lumpy pipeline of apartment projects.

For private sector houses, NSW showed a 1.9% gain building on a similar rise in March; Vic had a flat result; and Qld posted a particularly sharp 11.6%mth drop, unwinding policy-related strength through late last year and early 2012.

But notably, all states are recording trend declines in private sector house approvals although NSW and Vic are showing moderating trend declines.

"Overall, the April dwelling approvals report is weak but not quite the disaster the headline moves suggest," Westpac said.

The ex-WA results suggest activity is continuing to gradually stabilise but has not settled just yet, it concluded.

The HIA says the "sharp" fall in building approvals in April sends a "very negative signal regarding the wider domestic economy"

“Building approvals have continued to fall over 2012 to date and imply a recessionary level of new residential construction in 2012,” says HIA chief economist, Harley Dale.

“That’s not a positive, upbeat outcome to report, but it is a fact which can’t be ignored or denied,” says Dale.

“The last three months of building approvals confirm HIA’s message that housing starts are heading towards 130,000. That’s a recessionary level of new home building activity with obvious flow-on consequences for Australia’s manufacturing and retail sectors, and employment market.

“Leading indicators over recent quarters have pointed to this poor result and, worryingly, suggest more to come.

“The situation can be turned around, but it requires action and that action needs to occur now. HIA once again calls on Governments to collectively arrest the looming crisis through tax relief and an injection of investment and funding into the new housing sector. Such an injection will also provide vital impetus tothe broader non-resource economy,” says Dale.

Commenting on the April figures, Master Builders Australia (MBA) says they show that last year’s rate cuts have failed to have any impact on residential building approvals in April.

Building approvals are heading south as home buyer confidence weakens," says Peter Jones, chief economist at the MBA.

“The April data pre-dates the May rate cut but with home buyer confidence at such low levels it would appear rates need to fall further in order to arrest the decline in the market.”

“With the immediate challenge to restore confidence and drive a private sector recovery, the building industry is banking on further rate cuts to help boost confidence.”

“To underpin economic activity and jobs, the Government and the Reserve Bank need to boost the more than eighty per cent of the economy caught in the ‘slow lane’," says Jones.