Summary: Home approval numbers slip; decline in line with expected figure; monthly approvals down 14.6% compared to December 2019; Victorian lockdown not reflected in release; house approvals up but apartment approvals drop; economists pessimistic as population, jobs market weigh; non-residential approvals up.
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. Recent months’ figures have been volatile.
The Australian Bureau of Statistics has released the latest figures from August and total residential approvals slipped by 1.6% on a seasonally-adjusted basis. The slight fall over the month was largely in line with the 2.0% decline which had been generally expected but in contrast with July’s 12.2% increase after revisions. Total approvals increased by just 0.6% on an annual basis, a fairly significant slowdown from July’s comparable figure of 6.9% after it was revised up from 6.3%.
“Approvals are still tracking at subdued levels overall, with monthly approvals still down 14.6% vs December 2019,” said Westpac senior economist Matthew Hassan.
The figures were released at about the same time as August’s private credit report and Commonwealth bond yields moved a little higher. By the end of the day, 3-year and 10-year ACGB yields had each crept up 1bp to 0.21% and 0.84% respectively while the 20-year yield finished 2bps higher at 1.41%.
In the cash futures market, expectations of a change in the actual cash rate, currently at 0.13%, continued to favour a slight easing. At the end of the day, contract prices implied the cash rate would trade in a range between 0.065% and 0.085% through to the end of 2021.
Hassan noted “the impacts of the Victorian lockdown beginning early August were not reflected in this release. The state posted a moderate increase of 1.8% due to the time lag, though impacts will surely be seen in coming months.”
Approvals for new houses increased by 4.6% over the month after rising by 8.1% in July after revisions. On a 12-month basis, house approvals were 12.3% higher than they were in August 2019.