Surprise fall in building approvals for property in Australia

New figures from the Australian
Bureau of Statistics have found that approvals for new homes in the country
fell for a third consecutive month, raising fears that the housing market may
be weakening.

However, a leading economist
believes that a fall in building approvals is actually a good thing for the
housing market and should help prop up house prices.

Housing approvals fall by 3.5 per cent in June 2011

The Sydney Morning Herald reports that building approvals fell by 3.5
per cent in June, following a 7.9 per cent fall in May.  The results came as a surprise with
economists having predicted a 3 per cent increase in approvals for new
properties.

Commonwealth Bank senior
economist John Peters said: “‘We see consumers are down at the moment and it’s
reflected in retail but also in reticence to take out new mortgages.

“However, in the medium term, we
think we economic growth is going to pick up here (and) that will buoy the
housing sector.’’

With building approvals having
fallen, Australia is building far fewer properties than it needs.  There are around 135,000 new properties
in Australia being built every year against a demand of around 200,000.

Fall in new home approvals good for Australian economy

However, some experts believe
that fewer new homes are actually a positive thing for the Australian
economy.  ICAP Australia senior
economist Adam Carr said: “A fall in building approvals is good for house
prices.   It should ensure we
don’t see a marked drop-off in prices.

“We’re just seeing a
consolidation.”  The economist
means that the fall in approvals means that the country ‘may see modest price
growth going forward.’

Mr Carr added: ‘‘We’ve never
really had a glut of housing so to have a protracted period of below-average
housing starts suggests one thing: a rental squeeze and house prices going up.’