Summary: Home approval numbers fall again; fall a little worse than expected; house and apartment approvals both down moderately; some data indicative of housing recovery; non-residential approvals up after four months of falls but “further retracement ahead”.
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.
The Australian Bureau of Statistics has released the latest figures from June and total residential approvals fell by 4.9% on a seasonally-adjusted basis. The fall over the month was a greater one than the 2% decline which had been generally expected but it was not as large as May’s revised 15.8% drop. Total approvals decreased by 15.8% on an annual basis, another marked monthly deterioration from May’s comparable figure of -10.9% after it was revised up from -11.6%.
“The pandemic has taken its toll. Building approvals dropped for the fourth month in a row in June, the first four-month decline since the GFC related downturn” said ANZ economist Adelaide Timbrell.
Commonwealth bond yields declined a little. By the end of the day, 3-year and 10-year Treasury yields had each slipped 1bp to 0.30% and 0.88% respectively while the 20-year yield finished 2bps lower at 1.47%.
In the cash futures market, expectations of a change in the actual cash rate, currently at 0.13%, continued to remain low. By the end of the day, contracts implied the cash rate would remain in a range of 0.125% to 0.135% through to the latter part of 2021.
“Note that approvals will likely understate weakness in building as work on many existing projects will likely be delayed and some approved projects will be shelved or slower to commence,” said Westpac senior economist Matthew Hassan. However, he noted some positives. “Also bear in mind…coming months will see some additional support coming from the Government’s HomeBuilder scheme,”
Approvals for new houses decreased by 5.8% over the month, a worse result than May’s revised figure of -3.8%. On a 12-month basis, house approvals were 6.4% lower than they were in June 2019.