Further fall in home approvals even as interest rates are cut

02 September 2008

New figures from the Australian Bureau of Statistics (ABS) released today show a further fall in new home approvals while the Reserve Bank cuts interest rates.

The chief executive of the Urban Taskforce, Aaron Gadiel, said that todays interest rate cut of 0.25 per cent could make a real difference.


This is a small step for the Reserve Bank, but it could lead to a huge leap in confidence for developers, Mr Gadiel said.


Today the Australian Bureau of Statistics released home approvals figures for July, showing a seasonally adjusted fall in approvals of 2.3 per cent from the previous month. In the 12 months to July 2008, Victoria recorded a surge in new home approvals jumping by 13.8 per cent (to 43,178 for the full year). Queensland jumped ahead by a more modest 2.9 per cent (to 42,916).


Consistent with its recent poor performance, NSW trailed behind with a further annual fall in approvals of 1.7 per cent (to 31,002). This is the lowest such figure ever recorded for NSW by the ABS. In the 12 months to July 2008, only 15,629 houses were approved for construction in NSW a 1.5 per cent fall on the previous year. It is the sixth such annual fall in a row.


It compares with an 8.4 per cent increase in house approvals in Victoria (to 31,554). Queensland also increased its house approvals over the same period – by 3.1 per cent (to 29,816). Apartment and townhouse construction in NSW fell by 1.9 per cent over the 12 months to July 2008 with only 15,373 new homes approved.


Its the fifth consecutive annual fall in that state from a high of 25,255 new homes in the 12 months to July 2004. Apartments and townhouse approvals were on the rise in Victoria and Queensland in the 12 months to July 32 per cent (to 11,624) and 1.7 per cent (to 12,498) respectively.


Holdings costs are a big issue for developers – the 0.25 per cent cut in the cash rate will ease the pressure and make more development viable, Mr Gadiel said.


This may be of particular help in states where there are lengthy and time consuming approval processes such as NSW.


However, in NSW, local councils and the State Government need to fully implement the promised streamlining of the planning system.


The interest rate reduction will be a great help but more can be done by government authorities to kick start Australias most populous state.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.



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