Building approvals remain weak despite NSW boom

By Aidan Devine | 02 Mar 2012

Australia’s building approval numbers remain weak, but the latest figures reveal some surprising state by state results.

Australia’s number of building approvals saw a slight improvement in January, fuelled by a huge rise in NSW's approval figures.

Australia saw a seasonally adjusted rise of 0.9% during January, according to the ABS, with NSW recording a massive 37.6% increase in its approval numbers.

The slight rise in the nationwide figure followed a 0.8% fall during December.

The building approval picture varied drastically from state to state, however, with Queensland seeing its numbers drop by -22.1%. South Australia saw a 6.9% rise, while falls were recorded in Tasmania (-3%), Victoria (-2.7%) and WA (-0.4%).

New South Wales aside, the Housing Industry Association (HIA) has stated that January’s weak building approval figures are a worrying sign for the property market.

"The profile for building approvals in late 2011/early 2012 continues to imply a level of housing starts comparable to the very weak levels endured around the GFC. It's hard to call that a bright update for the domestic economy," said HIA chief economist Harley Dale.

He noted that, if you exclude NSW from the overall picture, approvals fell by almost 9% in January.

“Housing has a large reach into the wider domestic economy in terms of both output, and employment and urgent attention is required to turn the new residential building sector around," he said.

Both the HIA and Master Builders Australia (MBA) have called for further RBA interest rate cuts to stimulate the property industry and address Australia's housing undersupply situation – starting this month.

“The current level of dwelling approvals is running at around 140,000 (annualised), which is approximately 30% below what is needed to service current growth in population let alone beginning to eat into the housing shortage estimated by the Government’s own Housing Supply Council at more than 200,000 dwellings,” said MBA chief economist Peter Jones.

"Master Builders believes the November and December rate cuts by themselves are not enough and the Reserve Bank should lower rates next week to help boost confidence and reignite activity in the building industry."

However, while NSW may be leading the way for building approvals this year, ABS figures reveal that the amount of construction work that has taken place in the state in recent months has reached worryingly low levels, claims the Urban Taskforce.

"The construction value from NSW housing in the December 2011 quarter was $165 a person, while in Victoria it was $381 per person, and in Queensland construction value was $243 per person," said Urban Taskforce CEO Chris Johnson.

"NSW construction is very flat at the moment as can be seen from the difficulties of a number of building firms including Kell and Rigby and Reed Constructions," he added.

"The construction figures reflect planning decisions approvals made well over a year ago but the fact that NSW is still so far below the other states, on a per capita basis, is making it very difficult for NSW to be number one again."


Source: Urban Taskforce

What are your thoughts on the undersupply debate? Join the conversation on our property investment forum.

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