New house approvals suffered their biggest monthly decline in more than 20 years in September but the decline gave little relief to a home-building industry already struggling with shortages of workers and material to fulfil existing demand.
The 16 per cent contraction was the largest month-on-month decline since June 2000 – when detached dwellings slumped 18 per cent – and more than offset a jump in attached dwellings to result in a 4.3 per cent decline in total approvals, official figures on Wednesday showed.
But while the decline pulled detached dwelling approvals to a seasonally adjusted 10,275 from 12,251 in August, it was still just over the five-year monthly average and came as approvals of attached dwellings – apartments, townhouses and semi-detached homes – jumped 17 per cent.
Weaker overall approvals – an indicator of future activity – would not ease the materials and labour shortages hampering the industry and would not alter the risk of higher inflation, NAB economist Taylor Nugent said.
“Demand for new house construction is fading from its policy-induced peaks but a strong pipeline of activity and a still healthy flow of new approvals are expected to keep construction activity close to capacity in the near-term, even as the acuteness of some pressures eases over the next few quarters,” Mr Nugent said.
“New dwelling construction costs are expected to be a key tailwind for CPI inflation in the near term.”
The housing pipeline is coming off its HomeBuilder-induced sugar hit, however. September’s total approval figure of 18,090 monthly dwellings was well down from the March peak of 23,518 seasonally adjusted home approvals.
And even while monthly figures can be volatile, the growth over a rolling 12-monthly period that strips out monthly fluctuations appears to be peaking. Total dwelling approvals over the year to September stood at 231,816, a 32 per cent increase from the same period a year earlier – and the same pace of growth seen in August.
Economists also saw signs of a recovery emerging in apartments.
“The apartment sector looks to have firmly surpassed the trough, in approval terms,” BIS Oxford Economics economist Maree Kilroy said.
September was the second month of double-digit growth in the attached dwellings segment of the market, pulling the monthly total to 7815, the most since the 8603 for March.
Most of the increase came from NSW, but Victoria had also picked up off its pandemic lows, as certainty about the reopening of international borders increased, Mr Nugent said.
“Apartment approvals have been improving over the last year or so, led by New South Wales and, to a lesser extent, Queensland and Western Australia,” Housing Industry Association economist Tom Devitt said.
“This suggests investors are looking through the haze of the pandemic to a brighter outlook on the other side.”