Summary: Home approval numbers fall 7.1% in May; slightly better than expected figure; approvals falling but “still far above pre-pandemic levels”; “clearer signs” unwinding of HomeBuilder “starting to come through; house approvals down, apartment approvals up; non-residential approvals up 28.5% over month, up 36.4% over year.
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 May and total residential approvals fell by 7.1% on a seasonally-adjusted basis. The drop over the month was greater than the 5.0% fall which had been generally expected and larger than April’s 5.7% fall after revisions. Total approvals increased by 52.7% on an annual basis, an acceleration from the previous month’s revised figure of 42.4%. Monthly growth rates are often volatile.
“Building approvals may be falling, but they are still far above pre-pandemic levels,” said ANZ economist Adelaide Timbrell.
The figures were released on the same day as ANZ’s latest Job Ads report and the Melbourne Institute’s June reading of its Inflation Gauge. Commonwealth Government bond yields fell on the day and, by the close of business, the 3-year ACGB yield had slipped 1bp to 0.42%, the 10-year yield had shed 5bps to 1.44% while the 20-year yield finished 1bps lower at 2.04%.
Westpac senior economist Matthew Hassan said there are “clearer signs” an unwinding of the Federal HomeBuilder scheme “is starting to come through.” He expects “more steep declines…as the unwind continues in coming months.”
Approvals for new houses decreased by 10.3 over the month after rising by 5.0% in April after revisions. On a 12-month basis, house approvals were 53.6% higher than they were in May 2020, down from April’s comparable figure of 69.4%.