Research Team at ANZ, notes that the Australia’s approvals for the construction of new homes fell again in June, unwinding earlier unexpected gains.

Key Quotes

“Despite the fall, we think that housing construction will continue to support GDP for some time given a record number of homes under construction. We think that activity will eventually edge lower once builders make headway into this backlog of work, particularly with property developers facing tighter lending standards.

Residential building approvals fell for the second month in a row in June, down 2.9% (market: 0.8%; ANZ: -1%) after a period of strength earlier in 2016. We read this as more evidence that the housing market is moving past a broad peak, particularly when yesterday’s house price data showed that national prices fell by 0.5% in July.

• Surprisingly, the risk of an emerging oversupply in the Melbourne CBD is yet to hinder sentiment, with apartment approvals in Victoria rising for the fourth consecutive month to reach the highest level since October 2015. By contrast, apartment approvals in Queensland have fallen to the lowest level in a year.
• Despite the recent declines in approvals, a tremendous backlog of work suggests that residential investment will continue to be a significant driver of growth in the Australian economy over the rest of 2016.
• Non-residential building approvals rose by 21% in June, although this only offsets the previous month’s 18% decline, highlighting the volatility inherent in the series. In trend terms, approvals are showing some signs of improvement and are 10% higher than a year ago. We think that high vacancy rates across many regions and sectors are likely to limit the recovery in commercial construction.”