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 have been granted approval. Approvals data thus provides a useful indicator of future construction activity.
The latest building approval figures have been released by the Australian Bureau of Statistics and figures for August extended July’s falls. Seasonally-adjusted, total approvals fell by 9.4% in August, which is well off the 1% increase expected and a larger fall than July’s revised figure of -4.6%. On an annual basis, total approvals fell by 13.6%, which is also down from July’s comparable figure of -5.4% after revisions and less than the expected -3.7% contraction.
ANZ senior economist Felicity Emmett said tighter lending conditions were the likely culprit behind the lower figures. “Once again the weakness was concentrated in apartment approvals, which fell a sharp 18%, likely reflecting the more difficult financing conditions the sector is facing.” She also said not to expect any change soon. “Tighter credit conditions are the main reason we expect dwelling approvals to continue to trend lower in the near term, consistent with the near-term signal from the housing finance data.”