Australia: Housing approvals down, but significant backlog remains – ANZ

Daniel Gradwell, Senior Economist at ANZ, suggests that Australia’s February jump in housing approvals proved to be only temporary, followed as it was by a sharp drop in March.

Key Quotes

“This weakness was centred in the high rise apartment market, which continues to trend lower across New South Wales and Queensland. Quite clearly it seems reasonable to conclude we are past the peak in housing approvals, although a significant backlog of work will keep construction activity elevated.”

“Residential building approvals posted a sharp decline in March, more than offsetting the increases in the previous two months. The majority of this decline came from the units/apartments segment. In turn, New South Wales was responsible for most of this decline, with apartment approvals in the state down 36% m/m, although the other major markets of Victoria and Queensland also recorded falls in March.”

“The drop in approvals supports the conclusion that we have already seen the peak in building approvals. Nonetheless, there exists a tremendous backlog of work in the housing sector, with some 220,000 dwellings valued at AUD37bn currently under construction nationwide. While new building approvals are clearly lower than during the 2015-16 peak, this backlog of work will ensure that actual construction activity remains elevated for some time yet.”

“Non-residential approvals fell slightly in March, after a particularly strong increase in February. However, approvals continue to trend lower across all sectors. As highlighted in today’s business report, business conditions are strong, but this is not yet translating into actual activity.”