April –4.7%mth, –24.2%yr (vs mkt flat). Non high rise driving latest declines; holiday timing a compounding factor?
Dwelling approvals fell 4.7% in April, a significantly weaker than expected result – consensus was looking for a flat month, Westpac a small 1% decline. Note that revisions softened the choppy Jan-March profile with last month’s 15.5% drop pared back to a 13.4% decline.
The timing of holidays this year may have exacerbated the decline – with Easter falling into April and a weak prior to the ANZAC day long weekend many workers may have opted to take leave through this period, reducing the number of ‘effective working days’ in the month. While the ABS tries its best to control for seasonal anomalies, the rarity of this conjunction makes the task difficult.
Notably, the detail shows weakness outside ‘high rise’ segments. Detached house approvals fell 2.6%mth to be down over 20%yr, the pace of declines accelerating slightly in early 2019. Private units recorded a large 6.5% fall but the detail here points to ‘low rise’ was the driver this month rather than ‘high rise’. Total approvals ex high rise (covering both detached houses and mid-low rise) looks to be down 3.5% in the month.
The state detail shows gains in Qld (+11%mth) and NSW (+4.8%) were more than offset by sharp falls in Vic (–16.1%mth) and WA (–6.7%mth). Excluding high rise approvals, the picture is of more uniform weakness with 8-10%mth declines in NSW, Vic, WA and SA, Qld holding up a bit better with just a 1% fall.
The total value of renovation approvals fell 5.4%mth but is still up slightly by 2.3%yr on a rolling 3mth average basis with trend approvals about flat.
The total value of non res building approvals rose 16.1%mth but is still down 2.1%yr on a rolling 3mth basis.
Overall the update again points to weakening momentum, the composition pointing to a weaker construction profile through the middle of the year. The main caveat is around the timing of public holidays which may mean April figures are overstating weakness. Certainly the weakness in non-high rise approvals runs counter to what has been a firmer tone from construction-related finance approvals in recent months, usually a reasonably good guide to this segment.
Of course, the April data predates several positive developments for housing – a clearer signal that the RBA is prepared to lower interest rates; the Federal election result, which has removed the threat of tax policy changes around negative gearing and capital gains tax; the announcement of additional Federal support for first home buyers and indications that APRA is seeking to relax some loan serviceability assessment guidelines. More timely market measures suggest the combined effect has given some lift to activity – auction clearance rates lifting notably in Sydney and Melbourne over the first weekend after the election (albeit not quite as strongly as preliminary estimates had suggested).
