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$vuetify.icons.faPhone1300 650 620

RBA's rate hikes start to weigh on building approvals

Media release

RBA's rate hikes start to weigh on building approvals

Media release
A fall in building approvals at the end of 2022 is the next step in what has been a very well broadcast downturn in the housing market caused by the increase in the cash rate.

The Australian Bureau of Statistics today released its monthly building approvals data for November for detached houses and multi-units covering all states and territories.

“Building approvals fell by 9.0 per cent in the month of November, including a 2.4 per cent decline in detached approvals and a 19.9 per cent decline in multi-units,” added Mr Devitt.

“This puts detached approvals over the three months to November down by 12.1 per cent on the same quarter in 2021, and multi-units down by 11.4 per cent.

“Within two months of the RBA’s first interest rate hike in May 2022, leading indicators of building activity including new home sales started to decline. Investors, first home buyers and owner- occupiers started retreating from the housing market.

“Today’s data suggests that builders have worked through much of the large pipeline of work that existed in May 2022, when the RBA started increasing the cash rate. This will result in a slowdown in the number of homes under construction in 2023.

“The full impact of the 2022 increases in the cash rate will not be observed until the second half of 2023.

“The depth of this downturn will be determined by the RBA’s cash rate decisions.

“The RBA has already undertaken the steepest hiking cycle in a generation and it needs to hold fire on further hikes to give their actions to date time to play out.

“As more housing market indicators reflect the impact of cash rate increases to date, the RBA will be under increasing pressure to reverse course in the second half of this year,” concluded Mr Devitt.

In seasonally adjusted terms, total building approvals by state were mostly down in the three months to November compared to the same quarter in 2021, with the declines led by Western Australia (-27.4 per cent), followed by Queensland (-16.8 per cent), New South Wales (-12.0 per cent), and Victoria (- 6.6 per cent), with South Australia seeing the only increase (+6.2 per cent). In original terms, total building approvals increased in the Northern Territory (+29.0 per cent) and Tasmania (+7.8 per cent), while declining in the Australian Capital Territory (-34.8 per cent).

For more information please contact:

Thomas Devitt

Economist
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