Andrew Wilson: New home building declines in Canberra as demand outstrips supply

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New home building in Canberra continues to fall and, with current housing demand clearly ahead of supply, prices and rents can be expected to keep rising.

Latest ABS data reports that Canberra recorded just 258 building approvals for dwellings over May which was 14 per cent fewer than the 300 approved recorded over April.

Canberra has now recorded only 1491 dwelling approvals over the first five months of this year, which is a sharp decline of 41.4 per cent, or a fall of 1052 compared with the same period last year.

Both houses and units have recorded significant declines in planned building activity so far this year, with unit approvals down by 925, or 44.3 per cent, compared with the first five months of last year and house approvals down by 127, or 28 per cent fewer, on the same this year to date comparisons.

Total capital city home building approvals have also fallen significantly this year so far compared with last year, down by 4154, or 7.7 per cent fewer.

The capitals have recorded a decline of 2599 unit approvals, down 11.6 per cent with house approvals falling by 1555, or 5 per cent fewer, than recorded over the same period last year.

This week the Reserve Bank convened for its regular monthly meeting to determine the direction of official interest rates over June.

Following better economic news this month, the bank predictably decided to leave rates on hold at the record 1.5 per cent where they have been since the last cut in August last year.

• Related: ACT house construction rises, units decline
• Related: Canberra home renovators on the rise
• Related: Record lending strengthens Canberra housing market

Optimism is now on the rise regarding the prospects of the national economy that primarily reflects a sharp fall in recent monthly jobless data and better retail sales numbers.

Unemployment measures, however, are a lagging indicator of economic activity and trend retail sales remain relatively insipid.

The recent sustained fall in planned home building provides some sobering news for the economy, with more work still be done to get out of the doldrums.

Dr Andrew Wilson is Domain Group chief economist. Twitter@DocAndrewWilson join on LinkedIn and Facebook at MyHousingMarket.