Australia’s total dwelling approvals fell in the year-ending July, drifting to 173,509 approvals down11.2% on the prior year. Detached house approvals for the same period were 105,079 down 13.2%, but still comfortably above the psychological threshold of 100,000.
Regardless, declining dwelling approvals represent challenging numbers and are at near four-year lows, hitting their weakest point since August 2020, just two months after the introduction of the HomeBuilder incentive payments.
Despite the challenges of the annual numbers, it is the monthly data which provides early guidance on whether some stability is returning to the market. On a monthly basis, in July, detached housing approvals showed a glimmer of stability with a decline of just 0.1% with approvals for each of the past six months steady in the low 8,000s or around 2,000 per week.
That psychological barrier of 100,000 annual approvals can be sustained on this trajectory.
This small crack of sunlight was reinforced by Rhett Simonds, CEO of Simonds Group, who was quoted in the Australian Financial Review commenting that:
“We are seeing that consumer confidence has definitely returned in the last three-four months. Our sales haven’t slowed. They’re trending to be more positive over the course of the last three-four months than they have been for the last 12 months.”
Whether this is a sign of improvement or professional optimism, what we know is the past year has been tough. The HIA annual Top 100 Builder Report shows that housing starts for the largest 100 builders slumped last year, to a decade low 57,830 in the year to June. This is the lowest level since 2013, suggesting there may be some depth to come in the work at hand.
Reflecting the demise of some major builders during the period, the HIA report shows the market share of the biggest 100 slipped again to 33% from 36% in the 2022 financial year. For comparison purposes the top 100 accounted for 44% of all homes built in the 2021 financial year.
Tim Reardon, the HIA’s Chief Economist, HIA was quoted in the Australian Financial Review commenting that:
“…confidence remains subdued in most markets. We do have a bit of positivity in SA and WA and Queensland is not as bad as Sydney and Melbourne”.
There are mixed messages in the commentary on housing approvals right now and we need to be mindful of that. Importantly, the consensus seems to be the bottom has been reached or is near, and with spring sales season underway, the early signs are there is more activity in the new home sales market.
