Australia: Dwelling approvals down sharply - Westpac

Matthew Hassan, analyst at Westpac, suggests that the Australia’s new dwelling approvals tumbled sharply into year-end, down 26% between Sep and Dec, the last month marking the lowest level for monthly approvals since June 2013.

Key Quotes

“For Q4 as a whole, approvals were down 10.9%qtr and 23.7%yr.”

“Approvals are now signalling an unambiguous further weakening that will clearly see declining new dwelling investment detract from Australia’s growth in 2019. Westpac expects new dwelling investment to decline 8% in the year with a further 5% contraction in 2020.”

“Overall the December approvals update clearly challenges the RBA's view from the November Statement on Monetary Policy that "... dwelling investment is expected to decline gradually" and suggests that, as well as incorporating the weaker starting point from the Q3 national accounts, its revised forecasts to be released in Friday's February Statement on Monetary Policy will also need to materially lower the near term outlook for dwelling investment. Even if the Reserve Bank maintains its view that the negative 'wealth effect' spillovers from falling house prices will be limited, there is a clear ‘real economy’ negative coming through via new dwelling investment.”