Capital city home building on the slide

The recent capital city home building boom is clearly on the decline which presents growing concerns for general economic activity going forward.

Latest data from the ABS reports that the number of capital city dwellings approved for building fell sharply by 17.4 per cent over the December quarter to 31,419.

Dwelling approvals over 2016 were down by 0.8 per cent compared to the total recorded over 2015.

Capital city unit approvals fell by 25.1 per cent over the December quarter compared to the previous quarter, but were up by 1.4 per cent over 2016 compared to the previous year.

Approvals for houses were also down sharply over the December quarter falling by 11.1 per cent to 18,481.  Annual house approvals were 2.3 per cent lower in 2016 compared to 2015.

All capital cities recorded significant falls in approvals for units over 2016 compared to the previous year.  The clear exception was Sydney where annual unit approvals increased by 1.7 per cent.  Unit approvals were down sharply in Brisbane over the year by 19.3 per cent and also declined in Perth by 18.5 per cent.

Sydney was clearly the strongest market for unit building approvals over 2016 with 39,162 recorded followed by Melbourne 31,053 and Brisbane 16,374.  Melbourne however led the capitals clearly for new house building approvals recording 26,547, an increase over the year of 8.9 per cent and well ahead of Sydney with 17,042 – up by just 0.7 per cent annually.

The clear waning of home building activity evident in the latest ABS data will add to the case for a rate cut by the Reserve Bank sooner rather than later with housing construction having provided significant drive to the national economy over recent years.

Dr Andrew Wilson is Domain Group Chief Economist Twitter@DocAndrewWilson join on LinkedIn