Building approvals fell again in September, suggesting the Reserve Bank was right to cut the official cash rate on Tuesday.
Data from the Australian Bureau of Statistics found seasonally adjusted building approvals fell by 13.6 per cent in September, driven by a 32 per cent decline in the highly volatile “other dwellings” segment of the market.
“It’s best to abstract from monthly movements in the volatile ‘other dwellings’ segment as it can be misleading. When we examine the September quarter, “other dwellings” approvals are actually up by 1.9 per cent,” HIA acting chief economist Andrew Harvey said.
The core detached housing segment of the market saw approvals rise by 0.7 per cent in the month of September although they are down by 1.8 per cent over the September quarter.
“The headline result paints a worse picture than reality although it does have to be noted that the market conditions surrounding residential building are soft at present – total approvals in the year to September 2011 are down by 9.3 per cent when compared to the year to September 2010,” Mr Harvey said.
“Today’s figures confirm that yesterday’s interest rate cut was warranted – it was a necessary first step to an eventual recovery in new home building. This is not just because it will save around $50 a month off the average mortgage, but more importantly because it should help boost confidence as home buyers realise rates are no longer on an upwards trajectory.”