House approvals remain low

“New house building approvals increased by 1.2 per cent in the month of October,” stated HIA Senior Economist, Tom Devitt

The Australian Bureau of Statistics today released its monthly building approvals data for October for detached houses and multi-units covering all states and territories.

“This leaves house approvals over the last three months down by 11.2 per cent compared to the same quarter last year, and around its lowest levels of the last decade,” added Mr Devitt.

“Australian home builders had a significant pipeline of work under or awaiting construction when the RBA started increasing interest rates in May 2022. This pipeline has kept Australians employed and the economy going for over a year, obscuring the impact of the sharpest rate hiking cycle in a generation.

“This pipeline is now shrinking and in 2024 home builders will be starting construction on fewer new houses than at any time in the last decade.

“We have known this was coming for over a year. Leading indicators like new home sales, housing finance, building approvals and consumer confidence have been depressed all year.

“The problem is the RBA has been impatient in wanting to see progress in its lagging indicators, namely a rise in unemployment and a faster decline in inflation.

“With home building pipelines now shrinking, 2024 will be the year that these lagging indicators start to reflect the full impact of what the RBA has done over the last year and a half.

“The unfurling of global supply chains for home building materials and fuel will have eliminated most of Australia’s excess inflation by the end of this year.

“The RBA’s interest rate increases will suppress home building and spending across the broader economy next year by much more than would have been necessary to get inflation over the line into the RBA’s 2-3 per cent target range,” concluded Mr Devitt.

In seasonally adjusted terms, decreases in house approvals in the three months to October compared to the same quarter last year were led by New South Wales (-18.0 per cent), followed by Victoria (-11.3 per cent), Queensland (-9.0 per cent), South Australia (-8.4 cent) and Western Australia (-0.6 per cent). In original terms, declines were also seen in the Australian Capital Territory (-42.0 per cent) and the Northern Territory (-34.3 per cent), while Tasmania increased by 2.8 per cent.