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Approvals hint at gradual home price dip


developments.jpgBuilding approvals outside high rises have slightly softened, suggesting that any fall in home prices as more property comes onto the market will be gradual rather than a big crash.

Approvals for the construction of new homes fell 8.7 per cent in September, and were down 6.4 per cent in the year to September, Australian Bureau of Statistics figures, released on Wednesday, show.

The 'other dwellings' category, which includes apartment blocks and townhouses, also fell in September, by 16.3 per cent and 9.9 per cent through the year.

But, approvals for private sector houses rose 2.3 per cent in September, but were down 1.8 per cent over the year.

Westpac economist Matthew Hassan said the figures show that the underlying trend in approvals is softening.

"The combined picture from non-high-rise approvals now shows a trend decline for six consecutive months tracking at a 10 to 15 per cent annual pace," he said in a note.

"The state detail shows this coming through across all the main states - a more convincing, though still tentative, sign of a broad underlying slowdown."

JP Morgan economist Henry St John said the data indicated that the widely speculated fall in home prices as supply floods into the market over the next three years would be gradual rather than abrupt.

He pointed out that overall building approvals were up 2.2 per cent in the September quarter, from a 2.4 per cent fall the previous quarter.

And, house price rises had cooled to 6.8 per cent, from 8.4 per cent the previous year.

"This suggests that some adjustment in the housing market is occurring on both a nominal and real basis, and is suggestive of broader housing market stabilisation," Mr St John said.

"Moreover, this reinforces our argument that the decline in residential investment will be a gradual story as we move in to 2017, rather than seeing any harsh nominal adjustment."

Topics: Approvals

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