Apartment approvals led the fall in building approvals, posting a 34.9 per cent fall in May—to their weakest level since 2012, according to the Australian Bureau of Statistics.
The ABS figures, released Wednesday, shows building approvals falling 16.4 per cent in May in seasonally adjusted terms.
Prior to the release, the consensus expectation had been a 10 per cent fall.
Private sector houses fell modestly in May, with a 4.4 per cent drop, according to ABS.
But the decline was driven by multi-unit dwellings which fell 34.9 per cent, in seasonally adjusted terms.
“While minor effects of Covid-19 are apparent in the headline building approvals results, the fall in apartment approvals was broadly expected prior to the Covid-19 pandemic,” ABS director of construction statistics Daniel Rossi said.
CBA and ANZ economists expect building approvals to deteriorate over the remainder of this year.
Lower population growth in the near term, combined with job and income losses in industries with high shares of renters are described as key factors in the weak outlook for housing demand, explain ANZ economists Adelaide Timbrell and Catherine Birch.
“We do expect further weakness from here,” CBA’s Belinda Allen adds.
“Rolling annual approvals are now running at 173,000, down from 192,000 a year ago and a peak of 243,000 in August 2016,” Allen said.
ABS figures show dwelling approvals fell across all states, in seasonally adjusted terms.
Tasmania recorded double-digit falls with a drop of 23.3 per cent, Victoria 14.3 per cent, and New South Wales declined 11.3 per cent.
South Australia recorded a 9.3 per cent fall, Western Australia dropped 8.9 per cent, and Queensland 7.4 per cent.
As national building approvals continue to trend downwards in the coming months, BIS Oxford Economics’ Maree Kilroy says that apartments will be exposed to the biggest hit.
“The federally-funded Home Builder program stacked with state-level incentives will provide a boost but won’t begin to show through in the approval data until late 2020,” Kilroy said.
Approvals for private sector housing fell in Queensland by 9.9 per cent, Western Australia dropped by 7.9 per cent, and Victoria recorded a fall of 3.9 per cent, in seasonally adjusted terms.
South Australia bucked the national trend in May, with a rise of 7.1 per cent, and New South Wales rose slightly, up 1 per cent.