New dwelling approvals rose marginally in August but remain below the peaks of 2016, supporting the decision of the RBA to leave rates on hold, according to Tim Reardon, Principal Economist for the Housing Industry Association (HIA).
“Residential building approvals are around 11% lower than their peak last year. The slow-down in activity has been gradual but activity still remains at high levels,” said Tim.
The move to record low interest rates was instrumental in bringing new home building starts to an all-time high last year, noted the HIA economist. “A move to increase rates at this time would unnecessarily compound the decline in activity that is already underway.
“The market is already adjusting to constraints on domestic and foreign investors.”
Growth in approvals in August was driven by a 2.3% increase in multi-unit approvals. However, approvals for new detached houses fell by 1.1%. “We expect this modest decline to progress for the next couple of years,” said Tim. “Increases in energy costs have had a similar impact to an increase in interest rates by restricting both corporate and household consumption.
“Combined with low wage pressures and the Australian dollar having appreciated, it is unlikely that the RBA will need to move rates in the near future,” concluded Tim Reardon.