WA the only bright spot as detached house approvals fall 0.3% in November: ABS

Approvals for private sector houses fell 0.3% in November to 7,518, according the latest ABS building approval figures.

This was the second successive month that approvals for new houses have fallen though October's 1.5% decline was upwardly revised to just a 0.2% fall.

Building approvals for houses fell in all states except WA, which managed a 6.8% rise in November.

Private sector house approvals fell in South Australia (-7.6%), Queensland (-4.9%), New South Wales (-2.2%) and Victoria (-0.2%).

Building approval figures are forward indicators of future construction activity and the November figures indicate little hope of a near-term pick-up for the struggling home building sector, except for those builders operating in WA.

Over the past 12 months to November building approvals for new houses are up just 0.5% despite five cash rate cuts over this period and NSW, Queensland and South Australian state governments incentivising the purchase of new homes by first-home buyers.

Despite little growth in house approvals over this period, CommSec economist Craig James suggested this was in line with "normal" activity.

"There is a lot of hand-wringing about home building, but the figures show activity is basically 'normal'," says James.

"The number of approvals to build new homes is currently in line with the decade average and actually 3% stronger than the 5-year average.

"Like a lot of the Australian data at present, the home building industry is actually operating fairly normally. Data out yesterday showed 'normal' growth of retail spending at large retailers, the jobless rate is low near 5% and broader economic growth is not far away from average or “normal” growth," he says.

Apartment approvals increased by 10.1% over November to 5,552 to be up 36.4% year-on-year.

Across both houses and units, dwellings approved rose 2.9% in November 2012, in seasonally adjusted terms, following a fall of 5.1% in the previous month mainly due to a strong 8.7% rise in Victoria 

"Victoria has been building the most dwellings (about 33% of the national total) for the past few years. So its movements control the national outcomes," says the Commonwealth Bank's Diana Mousina.

The value of total building approved fell 4.1% in November, in seasonally adjusted terms, and has fallen for two months.

The value of residential building rose 2.7% while non-residential building fell 14.4%.

The value of renovation approvals fell 2% in November, leaving it 6% lower for the year. 

"All told, total approvals outcome was in line with expectations, the ongoing weakness in private house approvals remains a concern," says Westpac.

Commenting on the November figures, Peter Jones, Master Builders Australia’s chief economist says the bounce in approvals is welcomed, but the nascent recovery has yet to move out of first gear.

“November’s headline increase in approvals appears to be narrowly based, reliant on an unsustainable spike in inner Melbourne units rather than any broad-based upswing.

“The danger is that the recovery could run out of steam as the impact of previous interest rate cuts appear to have failed in lifting new homebuyer confidence and underpinning a sustained housing recovery.

“Authorities are banking on a strong revival in residential building as the economy loses mining as its key driver. For this to eventuate, the Reserve Bank should cut interest rates at the next board meeting in February,” he says.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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