Australian residential building approvals come in below market expectations in May

Australian May building approvals data support the view that new housing approvals are past the peak. Residential building approvals were slightly softer than market expectations in May, falling 3 percent, after a 5 percent fall in the previous month. The softness was mainly driven by Queensland. Apartment approvals in the state dropped 35 percent, to the lowest level in four years.

The historically stable segment of detached houses witnessed a 20 percent decline in approvals. While these declines follow quite solid results in the last two months, the 2,700 dwellings approved in Queensland in May is the softest monthly result since June 2013. Detached house approvals also saw a considerable fall in Victoria, down 10 percent. But, strength in the unit/apartment segment signified that Victorian approvals were unchanged overall.

Looking forward, the fall in housing finance for the construction and purchase of new dwellings implies that building approvals will continue to trend lower, noted ANZ in research report. The tighter credit environment seems to be affecting the construction side, as well as prices, but a large backlog of work would underpin investment in the near term.

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