House Prices Slip For Second Month, Building Approvals Slump

By Glenn Dyer | More Articles by Glenn Dyer

The first real impact of the coronavirus on home building finally appeared in the approvals process for May as the Australian Bureau of Statistics (ABS) revealed a 16.4% slide in overall approvals.

At the same time data for June showed Australian house prices fell for a second month in a row, thanks to the impact of the virus and the lockdowns.

The ABS Home unit and townhouse approvals slumped 34.9% in May and are now down 30.6% over the year to May.

Up to May’s big fall, approvals had held up, thanks in part to the slow planning and approvals systems in local government and a backlog in applications.

The big fall in May was due to the downturn in new projects before the appearance of COVID019 in March.

The backlog now seems to have been exhausted and the number of new greenlit projects slumped sharply in May.

Now approvals for June and July and beyond will see a greater impact from COVID-19 and the long forecast slump will take hold quickly.

Private house approvals fell 4.4% in May and are down 0.4% for the year. Surprisingly private house approvals rose in South Australia and NSW but that wasn’t enough to offset large drops in the other states.

Daniel Rossi, Director of Construction Statistics at the ABS, said in a statement with the May report that the fall in apartment approvals was broadly expected prior to the COVID-19 pandemic, and represented an 11-year low.

Dwelling approvals fell across all states, in seasonally adjusted terms. Double-digit falls were recorded in Tasmania (23.3%), Victoria (14.3%) and NSW (11.3%), while South Australia (9.3%), WA (8.9%) and Queensland (7.4%), saw smaller but still nasty falls.

Approvals for private sector houses fell in Queensland (9.9%), Western Australia (7.9%), and Victoria (3.9%), in seasonally adjusted terms. South Australia bucked the national movement in May, increasing 7.1%, while New South Wales rose slightly (1.0%).

The ABS said the value of total building approved fell 13.5% in May, in seasonally adjusted terms. The value of residential building fell 17.3%, while non-residential building declined 7.1%.

Meanwhile, CoreLogic’s report on June house prices showed a 0.8% fall in Australian capital city average dwelling prices fell. It was the second monthly decline in a row after a 0.5% fall in May and follows a 10.3% rise between June last year and April.

The drop means capital city average prices have now fallen 1.2% since their peak in April while annual price growth has now slowed to 8.9% from 9.7%.

Sydney dwelling prices fell by 0.8% and have now fallen by 1.2% from their April high and Melbourne prices fell 1.1% and are down 2% from their March high.

Prices also fell in Brisbane (-0.4%), Adelaide (-0.2%) and Perth (-1.1%) but rose in Hobart (by 0.3%), Canberra (by 0.3%) and Darwin (by 0.1%).

The AMP’s chief economist, Shane Oliver says “Regional dwelling prices only fell 0.2% in June and are likely to hold up better reflecting lower levels of indebtedness and hence less vulnerability to the financial stresses caused by the economic downturn.”

He said the bottom line from the report is that it is now “clear that the property cycle has now turned back down again” after the rises triggered by the three rate cuts from the Reserve Bank in 2019.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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