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Building approvals have fallen by 0.5 of a percentage point in May, with the decline driven by a fall in private sector housing approvals, according to data released by the Australia Bureau of Statistics.
The statistics show that private sector housing approvals are down by 1.3 per cent in trend terms, highlighting a continued need for policy reforms that drive economic growth.
And according to the Urban Development Institute of Australia (UDIA), interest rate cuts alone will be insufficient to boost growth.
“The weak building approval data underlines a continued fragility in a core pillar of our economy,” UDIA national executive director Connie Kirk said.
“The downward trajectory has been the same for the past year and beyond. Approvals are down by 19.6 per cent in the past year and detached dwelling approvals remain close to a six-year low.”
In addition, the seasonally adjusted number showed a 0.7 of a percentage point increase in total dwelling approvals, but Ms Kirk said it should be viewed with caution given that it was almost exclusively driven by a 14.4 per cent increase in one state — Victoria.
Ms Kirk advised that there is a “clear need” for dependence beyond interest rates and the need to ensure all policy levers are being exercised in the interests of confidence, certainty and growth.
“Housing construction propels investment, jobs, wages and economic growth — the exact formula that the Reserve Bank said it was seeking when it cut the cash rate to 1 per cent,” she said.
“The Reserve Bank’s actions — coupled with APRA’s recent decision to revise loan serviceability benchmarks — will hopefully begin to free credit for home buyers. We have also witnessed gains with retention of negative gearing, the pending introduction of the First Home Loan Deposit Scheme and downsizer measures boosting retirement incomes and housing supply.”
She added that the industry should seize every opportunity to reduce the barriers to housing construction.
“The endless layering of taxes and charges, red tape and complex planning regimes act as a brake on projects that has added to the downturn and forced proponents of housing projects to ensure seven to 10-year timelines to gain relevant approvals to commence development,” she said.
“We hope these issues capture the attention of the federal government as it moves to target the regulatory barriers to assistance, including green and red tape.”
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