Surprise fall in building approvals for property in Australia
Saturday 13th of August 2011
New figures from the Australian Bureau of Statistics have found that approvals for new homes in the country fell for a third consecutive month, raising fears that the housing market may be weakening.
However, a leading economist believes that a fall in building approvals is actually a good thing for the housing market and should help prop up house prices.
Housing approvals fall by 3.5 per cent in June 2011
The Sydney Morning Herald reports that building approvals fell by 3.5 per cent in June, following a 7.9 per cent fall in May. The results came as a surprise with economists having predicted a 3 per cent increase in approvals for new properties.
Commonwealth Bank senior economist John Peters said: “‘We see consumers are down at the moment and it's reflected in retail but also in reticence to take out new mortgages.
“However, in the medium term, we think we economic growth is going to pick up here (and) that will buoy the housing sector.’’
With building approvals having fallen, Australia is building far fewer properties than it needs. There are around 135,000 new properties in Australia being built every year against a demand of around 200,000.
Fall in new home approvals good for Australian economy
However, some experts believe that fewer new homes are actually a positive thing for the Australian economy. ICAP Australia senior economist Adam Carr said: “A fall in building approvals is good for house prices. It should ensure we don’t see a marked drop-off in prices.
"We’re just seeing a consolidation.” The economist means that the fall in approvals means that the country ‘may see modest price growth going forward.’
Mr Carr added: ‘‘We’ve never really had a glut of housing so to have a protracted period of below-average housing starts suggests one thing: a rental squeeze and house prices going up.’
