New home approvals drop down under

Building approvals in Australia dropped down to their lowest level in almost three years in February this year, according the Housing Industry Association.

The industry body announced the facts this week, prompting urgent calls for government action in lowering interest rates to boost construction across the country. Approvals for new homes fell by 7.8 per cent, the lowest figure since March 2009, and are now expected to fall even further.

‘We have warned for some time of the risk that new home building activity will again plumb the depths experienced around the time of the global financial crisis," HIA chief economist Harley Dale told Property Wire. "Building approvals are signalling that this outcome is unfolding in 2012."

The worst approval rate was found in New South Wales, where the seasonally adjusted figures fell by 41.2 per cent. Queensland also saw a drop of 13 per cent, with Tasmania posting a loss of 10.5 per cent. Other areas, such as Western Australia, Australian Capital Territory and Victoria, saw smaller decreases of 5.7 per cent, 1.4 per cent and 1.1 per cent respectively.

"Even allowing for New South Wales virtually driving the entire fall, it is, quite frankly, woeful. It is difficult to be positive about the short term prospects for new housing," said Dale.

"Current policy settings are failing the housing industry and therefore the wider Australian economy. The time for contemplation is over. Australia's interest rate settings are clearly too high and there needs to be immediate federal and state government focus on policy reform to boost flagging levels of new housing supply, a key driver of domestic economic activity and employment."

But despite the downturn in approvals, sales are actually on the up. Transactions for new homes increased by 3 per cent in February, with multi-unit property sales jumping up by 10.5 per cent. While industry experts do not expect a nationwide recovery due to high interest rates, Western Australia's outlook is considered positive. Detached home sales in the area surged by 12.8 per cent in February, suggesting the start of a housing rebound.