Aside from engineering and architectural design, one of the earliest requirements of a building project is to obtain approval from the relevant statutory body. As a result, building approvals data is a leading economic indicator of future construction. While not all projects which have been approved are completed, all completed projects will have been granted approval. Approvals data thus provides a useful indicator of future construction.
The latest building approval figures have been released by the Australian Bureau of Statistics and they show a slight fall in July. Although the total fell by 1.7%, the number was not as low as the -5% result which was expected after an 11.7% spike in June. On a 12 month basis, total approvals were 13.9% lower than a year ago.
House approvals rose by 4.1% over July, which translates to a 2.4% rise over the last 12 months. Apartment approvals are a lot more volatile (see chart below) and they fell by 3.3%, which places them 27.5% lower than the number of approvals in the same month last year.
Westpac senior economist Matthew Hassan thinks July’s figures present two questions worth considering. The first is whether the high-rise apartment component will continue its downward trend while the second question is whether the non-high rise component continues its recent recovery. “The risks to the first question look stacked to the downside particularly in the wake of the recent moves by Chinese authorities to curtail offshore investment by Chinese businesses. The second question remains more open…a slowdown in the wider housing market and weak buyer sentiment will eventually see the recent rally fade.”