The coronavirus outbreak's impact on the economy could potentially spill over to the housing market, slowing building approvals later this year, according to an economist.
The COVID-19 was at the crux of the Reserve Bank of Australia's decision to lower the cash rate to a historic low of 0.5%.
"While COVID-19 has increased downside risk for the economy as a whole, including the housing market, any impact on building approvals is likely to fall more into the second half of 2020," said Maree Kilroy, an economist at BIS Oxford Economics.
In a separate analysis last month, Trent Wiltshire, an economist at Domain, said the coronavirus outbreak could have impact on Australia's economy, albeit only in the short term.
"It will hit the tourism and education sectors particularly hard. But it's possible the outbreak will be much more severe and cause a significant economic slowdown in China, which would have a big impact on Australia's economy," he said.
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Still, building approvals went up by 4.9% over the three months to January. Despite this, however, approvals remain 2.3% lower than the same time last year.
The recent approvals data seem to indicate that the residential building market reached a turning point mid-way through 2019, fuelled by the series of rate cuts, said Angela Lillicrap, an economist at the Housing Industry Association.
"Approvals have stabilised at historically high levels. The 'trough' is comparable with the peaks of previous building cycles," she said.
Lillicrap said the stable condition of approvals during the month is indicative of the strong confidence in the market due to the growth in prices and low-rate environment.
"Restricted access to finance for first-home buyers will continue to be the biggest impediment to future growth in building approvals," she said.
However, on a seasonally adjusted basis, dwelling approvals fell by 15.3%, dragged by the 35.5% decline in the approvals for attached houses.
On a trend basis, the number of approvals rose by 0.5%, brought about by the 0.8% uptick in the detached-house segment.
"Meanwhile, private-sector dwellings excluding houses fell 0.1%. A significant fall in the number of apartments approved in January has offset the strength recorded in late 2019," said Daniel Rossi, director of construction statistics at ABS.
Across states and territories, approvals rose only in the Australian Capital Territory, Victoria, and Northern Territory. However, the strong showing in Victoria's approvals appears to have already waned, said Kilroy.
"The surge in apartment approvals seen recently in Victoria has stalled with the fall in high-density approvals in the state, acting as the driving force behind the weak national result," she said.