Australia’s building approvals fall in October, significant amount of work in pipeline to underpin housing construction

Australia’s building approvals came in much weaker than expected in October. After a long period of strength, building permits are finally declining. On a sequential basis, building permits fell 12.6 percent in October, as compared with consensus expectations of a rise of 1.5 percent. Building approvals had declined 9.3 percent on a monthly basis in September. On a year-on-year basis, building permits fell 24.9 percent in October.

House approvals in the month dropped 2.5 percent on a sequential basis, whereas the more volatile apartment category dropped sharply by 23.5 percent. This follows an 18 percent decline in September and implies that tighter financing conditions facing developers are beginning to bite, noted ANZ in a research report.

In terms of trend, the number of housing permits has dropped sharply. This is in line with the recent softness seen in investor housing finance approvals for construction and anecdotes of cancelled and postponed apartment projects. The Construction Work Done report of last week indicated an unexpected decline in residential activity in the third quarter; however, there continues to be a significant amount of work in the pipeline, which is expected to underpin Australia’s residential construction for some time, stated ANZ.

Meanwhile, non-residential building approvals reversed sharply in October after surging in September. Keeping the volatility aside, non-residential approvals are trending higher and indicate towards an improving outlook for non-mining business investment, especially in Victoria and NSW.

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