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While there have been green shoots of positive price growth since the federal election, the latest building approvals figures point to the ongoing fragility of the Australian housing market this year.
According to the latest figures from the Australian Bureau of Statistics (ABS), building approvals were down by 0.5 of a percentage point for May.
Compounding this issue, the Urban Development Institute believes that even historic low interest rates will not be sufficient enough to boost growth.
“The weak building approval data underlines a continued fragility in a core pillar of our economy,” said UDIA national executive director Connie Kirk.
“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,” she said.
The fine print
Further, 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.
“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.”