Australian building approvals fell in March owing to a drop in unit approvals. It is quite soon to see the effects of COVID-19 in the building approvals data, since there is a lag between applications and approvals, noted ANZ in a research report.
On a sequential basis, residential building approvals fell 4 percent in the month, after a revised rise of 19.4 percent seen in February. House approvals remained stable as they have been in 2020 so far; however, they are slightly lower than last year (-2.1 percent year-on-year). Unite approvals dropped 8 percent on a month-on-month basis but are still up compared to last March.
Region wise, Victoria saw the sharpest fall in approvals of 25 percent. This was driven by a drop of 45 percent in units. Meanwhile, NSW unit approvals rose for the third consecutive month, taking total NSW approvals to +24.6 percent. On a year-on-year basis, NSW approvals rose 21.6 percent, while Victoria and Queensland are slightly down with 1.3 percent and -2.9 percent. Approvals in South Australia and Western Australia saw a more significant fall.
Non-residential approvals fell for the second straight month. Closure of businesses due to COVID and a temporary lack of tourism and a possible shift towards working from home might subdue non-residential building beyond lockdown considerations, said ANZ.
“We expect that the conversion from March approvals to building activity will be lower than usual, due to the economic risks surrounding construction. Lower population growth, higher unemployment, declining household income and consumer uncertainty are all likely to reduce demand for investment properties, which will put downward pressure on residential construction, particularly for the apartment market”, added ANZ.
