Australian home-building permits in July fell less than what analysts had expected, rising hopes that the country’s residential construction is on track for a gradual easing.
According to data presented by the Australian Bureau of Statistics (ABS) on Wednesday, overall units approved declined by 1.7 percent to 18,299 in July, beating analysts’ expectation of a 5 percent drop.
This will be the second time in three months that approvals have declined as the weakness for apartment permits dragged down overall activity in the same month.
On a year to year basis, approvals in July were down by 13.9 percent. Analysts had anticipated permits to fall by 16.6 percent after shedding 2.3 percent in June.
Approvals for constructing and renovating establishments in the previous month were adjusted from 10.9 percent to 11.7 percent, the biggest increase in nearly since July 2016.
Economist John Peters stated that the figures seemed to be more resilient than markets had expected and that the widely projected decline in home building over the next two years will be gradual and modest rather than sharp and excruciating.
Approvals for private sector houses remained steady at 9,743, while other dwellings such as apartments and townhouses lost 6.7 percent to 8,080 after gaining 21.3 in June.
Despite sharp losses in apartment approvals, the sustained growth in housing permits might be suggesting that the subsiding of Australia’s residential construction boom could be far more modest than what analysts had anticipated.
The slowdown also comes amid tighter lending conditions and after the Reserve Bank of Australia (RBA) warned that construction activity may decline amid growing levels of housing debt, as the number of residential building approvals are falling from its peak in 2016.
Back in March, the Australian Prudential Regulation Authority (APRA) had limit higher risk interest-only loans to 30 percent for new residential mortgages.
This limit eventually resulted to rate increases by major lenders, as well as with banks repricing their loan books to make interest-only and investor loans more expensive.
Australian New Home Sales Hit Four-year Low
Figures released by ABS supported the data presented by the Housing Industry Association (HIA) which showed sales for new houses have reached a four-year low.
Amid a 16 percent gain in multi-unit sales, overall new home sales declined by 3.7 percent, adding to the 6.9 percent drop in June and is now at its lowest point since August 2013.
The fall of as much as 15.7 percent in new apartment sales in July was the main contributing factor as to why Australia’s new home sales keep on falling.
On the other hand, overall sales in Victoria rose by 9.8 percent, offsetting losses in South Australia with 16.2 percent, Queensland’s 16.1 percent, Western Australia at 9.1 percent, and New South Wales’ 5.2 percent during the month.
Total sales volume over the first seven months of the year was down 4.6 percent in July 2016.
Economist Time Reardon said that the trend matches their expectation that activity will fall gradually from these record high levels over a number of years.