 Slight falls in Australian building approvals
Building approval numbers fell in August by 0.1 per cent (seasonally adjusted), the first fall since May. Economists are not too concerned by this figure, as the fall comes of the back of two healthy months where solid growth was recorded.
The markets were predicting a rise of 2.5 per cent however, so this slight fall could be seen as a bit of a disappointment.
The Australian Bureau of Statistics released the figures which show Australian building approvals decreased to 12,126 units in August. This is the first dip in approvals for residential building in three months.
Over the 12 months to August, building approvals came out flat, says the ABS report.
Stephen Walters, chief economist at J.P. Morgan said these latest numbers are "no disaster".
"They were a little bit softer than expectations, but all of it was to do with the high-density dwellings," Mr Walters said.
"In terms of the broader housing market, the single dwellings, they were pretty good."
The building industry is not panicking just yet, due to the high volume of new loans approved in the first six months of the year. These approvals will create work for the coming year or two, giving the industry time to recover.
Property insiders were expecting some drop off in building approvals as the Rudd government's more generous first home owner boost is scaled back.
Mr Walters said the first home buyer market was still strong and had a lot of promise, due to the grant being wound back gradually.
The federal government increased the grant last October as part of their first stimulus package. However, from October 1 the grant will fall to $10,500 for those buying an existing home, and $14,000 for those building or buying a new home. Then from December 31 it will be cut back to the original $7,000. The incentives for building a new home are still there, says Mr Walters, as the government grant continues in its lower form until the end of the year, and interest rates are still low. New home building may also be affected by the predicted rising interest rates. As the first home owner grant is scaled back and interest rates rise, the local housing market will show its true colours. The Reserve Bank of Australia is expected to leave official rates on hold when it meets next week however many banks are already anticipating a November rate rise and have started lifting rates for fixed loans. The RBA has given strong hints that the cash rate will rise by early 2010.
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