In a recent official data released by the Australian Bureau of Statistics (ABS), Australian housing sector presents yet another disappointing picture. The data reported that the nation’s building approvals dropped by an alarming 9% for the month of November. This was way worse than meagre 0.5% drop expected by the analysts. Overall, the approvals have reported a massive 32.8% decline since last year.
The private sector houses witnessed only 9,443 approvals during November. The drop of 2.6% represents the weakest picture since April 2017. The government approvals in the category of apartment work dropped plunged by a massive 53.9% as compared to the previous year.
As per the official data, the month of November saw just 1,5465 (seasonally adjusted terms) approvals attributable to a large extent by housing slump observed in nation’s leading cities of Sydney and Melbourne over the last couple of months. What is alarming is that the released monthly figure is the lowest since August 2013. The data is in line with the sluggish nature of the construction sector of the economy since late 2017.
Overall, the government released approximately 216k approvals for the year, the weakest figure since February 2015. The data also points out at 14.6% drop in dwelling approvals in Victoria, 9.3% in NSW, 7.3% in Western Australia and 4.3% in Queensland for the November month.
As stated by analysts at Westpac, the slump in approvals is attributable to softer domestic and international housing demand, additional supply and strict lending environment. The recent critical driver, high rise developments, are correcting downward. Further decline is anticipated in the coming year as also suggested by weaker site purchases by property developers. The slowdown of the housing sector poses a bleak economic outlook for 2019, including a likely trend decline in new home building.
As stated by Kaixin Owyong, a leading economist at the National Australia Bank, the disappointing data reflects declining inclination of nation’s builders to deal with residential assets given the slowdown in economy’s housing sector.
A slight relief by the official data is the rise in approvals of non-residential buildings of offices and warehouses.
In a recent study release, The Organisation for Economic Co-operation and Development highlighted the heightened risks faced by the Australian economy regarding possible property bubble collapse in the near term. This disappointing forecast for the sector is in sharp contrast to the average return of 8% in residential investment property over the past ten years, as mentioned in the recently released Russel Long-Term Investing report. OECD in its official data anticipated 15% drop in house prices by 2019 end. The data reveals that Sydney and Melbourne property prices skyrocketed by 75 % during 2012-2017 and began to plunge after that.
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