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Matthew Hassan, analyst at Westpac, notes that Australia’s dwelling approvals recorded a sharp 9.7% drop in July coming against expectations that the stabilisation evident in previous months would consolidate.

Key Quotes

“The fall takes approvals to a 6 ½ year low, down 28% on a year ago. Total approvals are now tracking materially below ‘underlying demand’ for the first time since 2013.”

“As is often the case with big monthly moves, the fall was concentrated in unit approvals which posted an 18.4% drop to be down 44.2%yr.”

“The July fall takes high rise approvals to a new low. While this is still broadly consistent with the lead from site purchases, the risk is that continued stress in the sector is leading to more projects being delayed or cancelled and a possible further leg lower in approvals.”

“Overall the July update is clearly much weaker than expected and raises the risk that building activity may take another leg lower. As always, we caution about reading too much into one month’s data, particularly with volatile high rise approvals, but there is enough here to warrant careful monitoring in coming months.”