The federal government’s HomeBuilder scheme will help spur construction activity in the housing market as the impacts of the COVID-19 outbreak start to reflect in approval figures, an expert said.

The number of dwelling approvals has fallen by 16.4% in May on a seasonally-adjusted basis, according to the Australian Bureau of Statistics (ABS). The apartment segment led the fall, reporting a 35% decline in approvals. This correction has resulted in the segment reaching its weakest level of dwelling approval since 2012.

“While minor effects of COVID-19 are apparent in the headline building approvals results, the fall in apartment approvals was broadly expected prior to the COVID-19 pandemic,” said Daniel Rossi, director of construction statistics at the ABS.

The decline in approvals in May was widespread, with double-digit drops recorded in Tasmania, Victoria, and New South Wales.

“The decline in approvals in May is only the start of the COVID-19 shock in homebuilding. We anticipate building approvals data will continue to decline for a number of months, due to the lag in the approvals process,” said Angela Lillicrap, economist at the Housing Industry Association (HIA).

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Lillicrap attributes the decline in approvals to the economic uncertainty brought about by the restrictions to curb the spread of COVID-19.

With the impacts of the outbreak still expected to linger, approvals are likely to remain on a downtrend for the rest of the year. However, Lillicrap said the HomeBuilder program will likely help mitigate the potential downside risks.

“HomeBuilder and an easing of restrictions should assist in bringing consumers who delayed their purchasing decisions back to the market and minimise the adverse impact of the COVID-19 shock on employment in the sector, but this will not be reflected in ABS data for some months,” she said.

However, the HomeBuilder program is unlikely to have a significant impact on the apartment segment.

Maree Kilroy, economist for BIS Oxford Economics, shared the same sentiments, adding that weakness is likely to persist in the apartment segment due to the slowing demand. Furthermore, she said that the potential impacts of the construction stimulus from the government will not be felt instantly.

“The federally funded HomeBuilder program stacked with state-level incentives will provide a boost but won’t begin to show through in the approval data until late 2020,” she said.

Denita Wawn, CEO of Master Builders Australia, said that the HomeBuilder scheme will be able to help the construction industry recover.

“The lag effect of building activity means that HomeBuilder comes just in time for builders and tradies staring out at a valley of death with forward work for the next six to 12 months fast evaporating,” she said. “The building industry is simply too important to the economy and living standards to allow to collapse.”