Housing activity in Australia has passed its peak with the latest figures showing that investment in new homes fell by 4.4% in the first quarter of 2017.
This brings the sector down from record high investment in December 2016 and back to levels similar to those seen at the start of 2016, according to the latest report from the Housing Industry Association (HIA).
But the decline is consistent with other indicators that activity is slowing but the slowdown varies according to location. For example, metropolitan areas in particular continue to show strong activity.
‘Quarter by quarter fluctuations are expected and poor weather did contribute to the weak result in the March 2017 quarter. There is still a significant volume of work that remains to be done on projects at various stages of construction which is expected to see the level of investment remain close to a historically high level over the next few quarters,’ said Shane Garrett, HIA’s senior economist.
‘In the context of the residential building cycle cooling off a record high, investment in apartment building is holding up with a record number of new apartments still being constructed. This is helping to meet the strong demand in the housing market,’ he pointed out.
‘Residential construction, augmented by the substantial multiplier impact of industry activity through to the broader domestic economy, has been a mainstay of Australia’s economic growth during the last four years. It has been a strong driver for economic growth,’ he explained.
‘A decline in housing investment and a decline in exports were the major factors contributing to the relatively subdued growth in the economy this quarter. In seasonally adjusted terms, GDP increased by 0.3% during the March 2017 quarter and was 1.7% higher than the same period a year earlier,’ he added.
However, separate figures show that building approvals increased, particularly for multi-units in New South Wales and Queensland while nationally they were up by 4.4% in April.
However, according to Geordan Murray, HIA senior economist, residential building activity is expected to continue to soften over the course of 2017. ‘It is not unusual to see some volatility in monthly approval figures, particularly for multi-unit housing,’ he said.
He explained that while approvals for multi-unit dwellings jumped by 8.9% during April, when compared with the three months to April a year ago, multi-unit approvals in the three months to April 2017 were down by 21.5%.
And he also pointed out that a strong result for multi-unit approvals in New South Wales and Queensland was partially offset by a soft result for Victoria which recorded one of the weakest months of the cycle.
But the flow of detached house approvals is following a less volatile trajectory. Detached house approvals increased by 0.8% during the month, although the number of such approvals during the three months to April 2017 were down by 7.4% on the level a year ago.
A breakdown of the figures show that residential building approvals in April increased by 28.2% in Queensland, by 13.3% in South Australia and by 12% in New South Wales. They fell by 12.3% in Victoria, by 12.1% in Tasmania and by 4.8% in Western Australia. In trend terms, approvals increased by 3.8% in the Australian Capital Territory, while approvals fell by 1.6% in the Northern Territory.
