Building approvals fall 2.5% in June led by big drop in Victoria: ABS

The number of dwellings approved for construction fell 2.5% in June in seasonally adjusted terms, according to latest ABS estimates, following a rise of 27% in the previous month.

Economists polled by Bloomberg last week had forecast a much bigger 15% month-on-month fall in building approvals in June.

Nevertheless, the results will disappoint the residential construction sector.

The biggest monthly fall in dwelling approvals in June was recorded in Victoria (-14.6%).

There were, however, strong gains in the mining states with Western Australian approvals up 28.9% followed by Queensland (18.0%)

Smaller gains were also recorded in Tasmania (9.2%), New South Wales (7.7%) and South Australia (4.1%) in seasonally adjusted terms.

The detached housing sector remained weak.

Approvals for private sector houses fell 1.1% in June and are down 9.1% year-on-year with the monthly fall led by  New South Wales (-4.5%) and Victoria (-3.3%) but rose in Queensland (5.3%), Western Australia (4.4%) and South Australia (0.4%).

The value of total building approved fell 9.8% in June, in seasonally adjusted terms, after rising for 2 months. The value of residential building rose 0.2% while non-residential building fell 22.3%.

The Housing Industry Association noted the approvals update was a "reasonable result at face value."

The HIA chief economist, Harley Dale said the decline of 2.5% in total seasonally adjusted building approvals in June 2012 looked "modest" in the context of the 27% jump which occurred the previous month."

"Furthermore, the headline result reflects the sharp decline now underway in Victoria, with building approvals increasing in June in every other state and territory," said Harley Dale.

"Building approvals increased in the June 2012 quarter and this improvement is driven by a relatively healthy rebound in ‘other dwellings’," said Harley Dale. "The concerning factor is that this recovery masks on-going deterioration in the core detached house segment of the new home building market."

"Housing starts are back at recessionary levels in 2012 and the pain of that situation for tens of thousands of businesses around the country is unfortunately plain to see," Harley Dale said.

"It is vital to see evidence of a broad-based recovery in building approvals and that is simply not the case at present," said Harley Dale. "Detached house approvals fell by 6.2% in the June 2012 quarter and by 10.2% last financial year to reach their lowest level in over a decade. The trend decline in detached house approvals now extends to 30 consecutive months."

"That situation makes the case for government investment in new housing and reform of the excessive and inefficient levels of taxation on the sector all the more compelling," added Harley Dale.