After enduring a challenging few months, Australia’s building industry is showing signs of improvement. Recent data from the Australian Bureau of Statistics indicate a much-needed upturn in building approvals, which grew by seven per cent this past August on their own. This comes after a 7.4 per cent decline in July.
Daniel Rossi, ABS’s lead in construction statistics, reported a reviving housing sector as approvals for private houses increased by 5.8 per cent, breaking a three-month streak of stasis. Likewise in the private sector, exclusive of housing, approvals escalated by nearly ten per cent, showing a significant recovery from the 14.6 per cent dip experienced in July.
In terms of regional data, total dwelling permits in Victoria, New South Wales, and Western Australia marked notable increases, each recording rises of 22.2 per cent, 12.5 per cent, and 12.3 per cent respectively. However, the picture is not uniformly rosy as Queensland, Tasmania, and South Australia all saw dwelling permit decreases.
Nevertheless, across all regions, approvals for private sector housing saw an upward turn, with Western Australia leading the pack with a 13 per cent growth in August. Furthermore, the overall value of total building approvals managed to climb 0.5 per cent, rebounding from a precipitous 16.0 per cent drop in July.
Oxford Economics Australia’s Senior Economist, Maree Kilroy, forecasts the national dwelling commencements to dip below 150,000 this fiscal year. A complex blend of rising interest rates, delays, and escalating build costs have amplified the hurdles faced by prospective homeowners and developers. “The road to recovery will be a long one, with policy changes and planning delays meaning it will take until the latter half of this decade to see a significant boost in activity,” she opined.
A recent report on lending indicators from ABS demonstrates a slight increase of 2.5 per cent in new owner-occupier home loans in August, despite the figure still being 12.3 per cent lower than the previous year. Finance statistics head at ABS, Mish Tan, noted a return to pre-pandemic levels of new owner-occupier loans since February 2023. However, the numbers of refinanced owner-occupier loan commitments between lenders decreased slightly by 5.4 per cent.
While the number of new loans for total fixed term personal finance extended by 6.1 per cent, resulting in a boost of $2.5bn, the prominence of refinancing remained high as many sought better loans amid an environment of escalated interest rates. Interestingly, a 5.9 per cent increase in lending for the purchase of road vehicles fuelled this.
The road to economic recovery appears to be a mixed journey across states, with Queensland, South Australia and Western Australia displaying the most resilience despite successive cash rate rises. “It is only once the interest rate cuts kick in from late 2024 that we will see a true acceleration in lending volumes, with first home buyers expected to lead the way. The demographic dynamics favouring both upgrades and downsizers will fuel the next phase of expansion,” concluded Kilroy.
