The housing sector remains on the road to recovery despite a worse than expected fall in the number of approvals for new homes in August.
Local council approvals for the building of new houses, townhouses and apartments fell 4.7 per cent in August, more than economists’ expectations of a 1.0 per cent fall.
But despite the fall in August, the overall trend remains positive, ANZ economist Dylan Eades said.
“On a month to month basis, these data are quite volatile and do tend to bounce around quite a bit,” Mr Eades said.
“Overall, the story for the residential construction market remains relatively positive.”
Over the year to August, building approvals were up 7.7 per cent, seasonally adjusted, Australian Bureau of Statistics figures show.
“What we’re seeing now is just an unwinding of the strength that we did see in the previous month,” Mr Eades said.
“We’re still very much of the view that given the lower interest rate environment, dwelling approvals will continue to strengthen over the rest of this year and next year as well.”
St George economist Janu Chan said the volatility was driven by multi-unit developments such as apartments and units, approvals for which fell 6.5 per cent in August, after a 24.4 per cent surge in July.
“Despite the weak headline result, we suspect that the fall is largely reflective of data volatility, and that a recovery in dwelling investment remains underway,” Ms Chan said.
“Rising house prices should further encourage growth in housing construction, which will help support economic activity.
Investment in housing needs to strengthen and contribute to economic growth as the economy moves away from being driven by mining investment, she said.
“In time, this should alleviate some of the housing shortages which exist in parts of the country,” Ms Chan said.
But Invast chief market analyst Peter Esho said the August figures broke the positive trend set in July, despite the view that lower interest rates would strengthen prices and demand for new homes.
“That hypothesis seems to have completely fallen apart by today’s building approval numbers,” he said.
“The RBA’s rate cuts alone are not enough to see building approvals take off and a fiscal response should now be more carefully considered as part of an overall policy.”
Housing Industry Association chief economist Harley Dale said the figures showed the pace of the housing recovery was too slow and government action was needed.