Approvals figures for dwellings, that is apartments and houses, have been heading south since mid-2018. As an indicator of investor confidence, falling approval figures represent a worrying signal, not just for the building sector but for the overall economy. There has been some expectation of a recovery in recent months but little in the way of confirmation.
The Australian Bureau of Statistics has now released the latest figures and total residential approvals dropped by 9.7% on a seasonally-adjusted basis in July, well under the 0.0% which had been expected and a marked deterioration from June’s revised figure of -0.8%. On an annual basis, total approvals fell by 28.5%, as compared to June’s comparable figure of -25.0% after revisions.
Westpac senior economist Matthew Hassan said, “Overall the July update is clearly much weaker than expected and raises the risk that building activity may take another leg lower.”
Financial markets reacted in a subdued fashion, although the release of July’s private credit figures will have also had some effect. By the end of the day, 3-year ACGB yields remained unchanged at 0.67%, 10-year yields had inched up 1bp to 0.88% and 20-year yields remained unchanged at 1.29%.