Interest rate drop couldn’t have come at a better time for NSW home approvals

RBA’s decision today to drop interest rates to 1.75% couldn’t have come at a better time for NSW as home approvals start to fall, says the Urban Taskforce.

“The March 2016 home approvals produced by the Australian Bureau of Statistics have dropped to 5,235 from 5,996 in June 2015, “ says Urban Taskforce CEO, Chris Johnson. “Detached house approvals for March sit at 2,182 in trend terms compared to 3,209 for Victoria.”

“Higher density approvals continue to decline in NSW from 3,676 in May 2015 to 3,054 in March 2016. It seems the drop has slowed a little and this continues the slowdown from the high point in mid-2015.”

“The biggest drop in approvals has been in the non-residential sector where NSW dropped from a value of $832,561,000 in September 2015 to $618,651,000 in March 2016. This is a large drop particularly as Victoria recorded approvals of $790,675,000 which is well above the NSW figure. With NSW’s population much larger than Victoria’s, this is also an indication that we are not producing enough employment lands in NSW”

“In the light of the drops to approvals in NSW it is good news that the Reserve Bank has dropped rates by 0.25% to 1.75%. The Reserve Bank’s reduction was partly influenced by fear of a deflationary spiral and the slowing approval numbers in NSW seem to reflect this.”

“It is important that the NSW Government support more housing supply by simplifying the approvals system. It is still taking too long to get approvals in NSW which is causing the supply of new homes and jobs to underperform compared to Victoria.”

See below graphs based on ABS figures:

Graph 1 03.05.16

Graph 2 03.05.16

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