Building gets the nod of approval
Home construction is rebounding and prices are turning around – in most, but not all, states of Australia.
Figures released by Master Builders Australia show building approvals for new apartments and units leapt up by 16.1 per cent during September.
Queensland led the gain in new home building approvals (up 19.6 per cent) followed by South Australia (up 16.0 per cent). Tasmania and Victoria experienced more modest increases (up 3.4 per cent and 3.3 per cent respectively) during the month.
“Momentum in Australia’s housing market appears to be growing, with the volume of new home building approvals expanding by 7.6 per cent during September,” said Shane Garrett, Chief Economist from Master Builders of Australia.
“House prices, lending and now building approvals all indicate that Australia’s housing market recovery is gaining traction.”
Encouragingly the volume of new approvals for high density housing has occurred for two consecutive months, whilst September’s gain was led by apartments and units, a segment of the market which looks to have shaken off its malaise from earlier in the year.
“Detached house approvals also rose during September albeit at a more modest rate of 2.7%,” said Garrett.
The September data was not all good news for home builders. New dwelling approvals dropped during September in WA (by 24 per cent), NT (9.3 per cent) and NSW (down 2.5 per cent).
The Perth and Darwin markets are not showing any signs of rebound as yet with prices and approvals both dropping last quarter.
However, the Reserve Bank of Australia was adequately encouraged by the national inflation and construction figures to keep rates on hold during November at its record low of 0.75 per cent.
There is unlikely to be a further cut in 2019 because the RBA has signalled a wait and see approach as it weighs up the effect of three cuts within a five-month period.
CoreLogic research director Tim Lawless said the decision to hold the cash rate at the historic low of 0.75 per cent “was widely anticipated, considering the RBA is running out of conventional monetary policy ammunition.”
Lawless noted several factors influencing the decision to hold including lower unemployment and higher inflation in the September (1.7 per cent) quarter.
He also noted a rebound in housing activity as a consequence of recent cuts.
“Additionally, a rebound in housing values and a rise in buyer activity will hopefully begin to flow through to a gradual improvement in household wealth and spending,” Lawless said.
Certainly, as buyers return to the market, it is having a positive effect on house prices, with national house prices rising an average of 1.2 per cent, with Melbourne and Sydney leading the way with rises of 2.3 per cent and 1.7 per cent respectively.
The median house price in Sydney is now $817,886. The median house price in Melbourne is now $650,197 according to CoreLogic.
The median house price in Perth has fallen to the lowest price of any Australian capital city at $451,800, 22 per cent down from the peak of the Perth property market in mid-2014.
There are still some economic issues causing concern as lower consumer confidence, residential construction activity and retail spending continues to slightly hinder economic policy.
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