The ABS released their May 2019 Building Approvals data today. The trend estimate for total dwellings approved fell 0.5% in May, while the less reliable seasonally adjusted estimate for total dwellings approved rose 0.7% in May.
As you know DFA uses the trend series in our analysis and modelling.
However, most reports will pick the seasonally adjusted series and claim a “rebound” in approvals.
In fact, on both trend and seasonally adjusted measures, private sector house approvals fell, by 1.3% in trend terms and 0.3% in seasonally adjusted terms.
On the other hand, private sector dwellings excluding houses rose 0.6% in trend terms. while the seasonally adjusted estimate rose 1.2%.
Across the states, total approvals rose a little in Queensland and South Australia, together with a big hike in Canberra (on small volumes), while there was a percentage fall in New South Wales and Victoria, as well as Western Australia and the Northern Territories.
The volume trends really highlight the declines in New South Wales and Victoria, which are not offsetting the small rises elsewhere, especially in the ACT.
In New South Wales the trend estimate for total number of dwelling units approved fell 0.7% in May, while the number of private sector houses fell 2.9%.
In Victoria the trend estimate for total number of dwelling units approved fell 1.5% in May, while the number of private sector houses fell 1.3%.
In Queensland, the trend estimate for total number of dwelling units approved rose 0.4% in May, while the number of private sector houses fell 0.1% in May.
And in South Australia, the trend estimate for total number of dwelling units approved rose 0.4% in May, while the number of private sector houses was flat in May.
Finally, In Western Australia, the trend estimate for total number of dwelling units approved fell 0.7% in May and the number of private sector houses fell 0.7% in May.
The trend estimate of the value of total building approved fell 0.2% in May and has fallen for three months. The value of residential building fell 0.6% and has fallen for 16 months. The value of non-residential building rose 0.3% and has risen for nine months.
The seasonally adjusted estimate of the value of total building approved fell 0.2% in May. The value of residential building rose 4.7%, while the value of non-residential building fell 6.7%.
The HIA said “The decline in dwelling approvals appears to be losing momentum. This is a welcome reprieve for the housing industry after the persistent declines measured throughout 2018”.
“Recent positive news relating to house prices and new home sales has started filtering through. Even if this isn’t the bottom of the cycle the pick-up in new home sales in May suggests the pace of decline is slowing”.
Westpac said ” Overall the May update was a touch firmer than expected but the detail was not great with clear questions around the sustainability of the gain in high rise approvals and weakness elsewhere”.
That is closer to the mark. Little here, yet to argue for a shift in gears.
As Westpac put it ” All of this still predates several positive developments for housing, in particular: the Federal election result, which has removed the threat of tax policy changes around negative gearing and capital gains tax; and the RBA’s interest rate cuts in June and July. More timely market measures suggest wider housing market conditions have improved, especially in Sydney and Melbourne. We suspect that shift will be slow to flow through to new dwelling construction with an overhang of stock in some segments and financing issues likely to continue restraining activity near term.
Certainly the major markets of Sydney, Melbourne and Brisbane all have a way to go before we can claim a rebound, and of course there is a significant oversupply of new high-rise under construction in these centres, despite the worries about construction standards, and the disappearing indemnity insurance in the sector.
To be a registered surveyor with the Victorian Building Authority (VBA) a person must have professional indemnity insurance, without any exemptions.
The same rule applies in NSW and Queensland.
But insurance companies are no longer providing this option and the industry is warning work on buildings may simply stop.
Other surveyors have reported that the cost of their insurance premiums and excesses have more than quadrupled.
Building surveyors are responsible for signing off on buildings, including building permits and occupancy permits.
While local government building surveyors can also sign off on permits, private building surveyors have been the preferred option for most of the building industry.
The chief executive of the Australian Institute of Building Surveyors, Brett Mace, warned the building industry could start to slow down over the next year.
“We think it’s a huge crisis,” Mr Mace said.
“If building surveyors are unable to be registered then you’re not going to be able to provide approvals and the construction industry will come to a stop.”
The Master Builders Association (MBA) said up to 30 per cent of building surveyors are required to renew their insurance by the end of June.
“If they are unable to obtain insurance or the insurance offered to them is non-compliant due to exclusions being imposed, many building projects could come to a standstill,” the MBA said in a statement.
One more reason to be cautious about a lift in approvals ahead.
