The outlook for the residential construction sector has turned even bleaker, with new ABS figures showing a 7.8% drop to 10,771 dwelling approvals in February.
For the year to February, building approvals are down 15.2%, with the figures showing the lowest number of residential approvals since May 2009.
A Reuters poll had been forecasting a 0.3% increase in building approvals over March, while other forecasts had gone as high as a 2% increase.
Commenting on the approval figures, Westpac says that for the RBA, “the weakness apparent in housing approvals since mid-2011 has so far drawn relatively little comment”.
“The soft Feb data and weakness in other aspects of the housing market and the domestic picture more generally may be seeing some reassessment though, of both momentum and the impetus coming from recent policy easing,” the bank says.
“The January to February data tends to be more heavily affected by seasonal adjustment problems due to the market low season.
“The state detail suggests there may be some problems here with NSW slumping 40% in Feb after a 36% surge in Jan– conversely Queensland surged 13% for the month after falling 20% in January,” Westpac says.
Former Gillard government economic adviser Stephen Koukoulas tweeted that the RBA needed to “wake up” following the “massively negative” building approvals figures on top of negative manufacturing data and neutral inflation.
“Let’s see what RBA does! They cut unexpectedly twice last year & while they need a hurry up, let’s wait a second,” tweeted Koukoulas.
CommSec economist Savanth Sebastian told AAP the February result was lower than expected, but followed a known trend.
“It’s a very volatile reading, but if you look at the numbers, it shows that the housing sector is not showing any sign of strong gains,” he says.
Savanth says problems in the residential construction sector are being compounded by potential homebuyers “focusing on existing housing” and not adding to the “new housing segment of the market, which is keeping developers hesitant in committing to new projects”.
In the long run he says strengths in other areas of housing will provide support including low rental vacancies, with “rental yields driving property price growth over the next couple of years”.
This article first appeared at PropertyObserver.