The country’s cooling housing market was made more apparent the as Housing Industry Association (HIA) reported that building approvals decreased by 5.2% in July this year, and, in a separate data from Australian Bureau of Statistics, it was found building approvals in July were 5.6 % lower than in the same month in 2017.

HIA’s Principal Economist Tim Reardon listed several factors that have caused the downturn.

“The market is cooling for a number of reasons including a slowdown in inward migration since July 2017, constraints on investor finance imposed by state and federal governments and falling house prices,” he said.

“Finance has become increasingly difficult to access for home purchasers. Restrictions on lending to investors and rising borrowing costs have seen credit growth squeezed. Falling house prices in metropolitan areas have also contributed to banks tightening their lending conditions which have further constrained the availability of finance.”

“An increase in interest rates charged by banks will accelerate the slowdown in approvals.”

Aside from those elements, slower population growth in Australia since June 2017 has also contributed to the decline in approvals. Not surprisingly, this slowdown began  when modifications to visa requirements were announced early last year.

HIA’s report further noted how the slowdown in select states has usually been balanced by strong activity in Victoria. However, Victorian home approvals are also slightly falling. Thus, decrease in building approvals is foreseen to continue until 2018.

On a more positive note, the volume of approvals for new detached houses has reached the highest levels seen in 15 years.

For reference, the shifts in dwelling approvals for each state are as follows: in seasonally adjusted terms, total dwelling approvals in July dropped in New South Wales (-5.2 %), Victoria (- 4.6 %), Queensland (-6.0 %), South Australia (-26.5 %) and Western Australia (-14.7 %). Meanwhile, the approvals improved in Tasmania by 13.6 %.  Finally, in trend terms, total dwelling approvals jumped by 4.5 % in the Northern Territory and in the Australian Capital Territory, up 12.2 %.

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