The September building permits data is here from earlier: Australia building approvals for September: -8.7% m/m (vs. expected -3.0%)
Responses so far from Westpac and NAB
- Approvals dropped,... within the range of 'normal' volatility for month to month reads
- Detail shows a sharp 16.3% drop in units was the main driver in the month ... within this segment the 'usual culprit' when there is volatility - high rise approvals - was down just over 20% in the month but down only slightly on a year ago, reflecting the high starting point following a big surge in July
- The combined picture from 'non high rise' approvals now show a trend decline for six consecutive months tracking at a 10-15% annual pace
- The signal from 'high rise' remains much less conclusive - despite the drop it is unclear whether the segment is levelling out or turning down with approvals uneven across the major states as well.
- Building approvals for September lower than expected ... all from a 16.3% decline in apartment approvals
- The trends in (apartments and house approvals) are close to flat (apartments -0.7% m/m, houses -0.5%)
- Trend residential approvals still running at an annual rate of 238K ... Still a solid number, but it seems that the cycle is topping out at a high level
CBA (bolding mine here):
- Annual approvals are 238k -still near the record level of241k of October 2015 - there's a lot of construction coming
- Non-residential approvals rose to a record $5.55bn in September, to be 98% higher than a year ago
- In the big picture, annual approvals are still in the 230k to 240k range, which means the construction sector can run near full capacity for the coming year . The very large inner-city apartment blocks can have demolition and construction periods of between 2 and3 years.
- Recent stories on oversupply of new apartments in 2017 and 2018 need to also bear in mind that national population growth is still running at 320k
- It means annual housing demandis around 180k
- After years of underbuilding, Australia now has the prospect of overbuilding which will help moderate some of the issues around housing affordability which covers rents as well as prices.
- Non-residential building approvals rose to a record $5.5bn in September
- There were some large rises in approvals for office blocks, retail and hotels
- An upward shift in the non-residential construction area was long overdue in our view ... It represents another leg in the transition story, along with higher infrastructure spending
- Combining record low interest rates, rising populations pushing along demand for retail and offices, and record inbound tourism gives a recipe for more construction activity.
- Commercial office vacancy rates in Sydney and Melbourne are trending lower, not higher
- So there should be more new office developments announced over the coming year
- The capital city hotels are running higher occupancy rates as tourism rises