The Australian Bureau of Statistics (ABS) has reported that in the month of October, Queensland led a nationwide decline in building approvals. Nationally building approvals have dropped 10.7% with building approvals in Queensland dropping 19.5%.
The Queensland government has sought to stimulate the building of new housing by providing a $10,000 bonus but the bonus has failed to increase the construction of new homes. Western Australia is the only state to record an increase in building approvals with an increase of 2.1%. In Victoria approvals have dropped 18%. In New South Wales building approvals have seen a flat growth of 0.4%.
Building approvals are a key indicator of future residential construction activity. The last 12 months has seen approvals drop 29.8%.
The $10,000 building bonus was introduced for potential new home buyers in Queensland on August 1 and will be available until January 31, 2012. There are no restrictions on receiving the incentive. Buyers, including investors, are entitled to receive the incentive if they are buying or building a new house, townhouse or unit under $600,000.
Speaking at an investor conference recently Matthew Quinn, Stockland CEO, discussed the poor acceptance of the grant. Just 1,200 applications have been lodged to date. Applications equate to $12 million, the Queensland government has set aside $140 million for the scheme.
Matthew Hassan a senior economist at Westpac has warned of a ‘hard landing’ for new construction. Based on consensus expectations of a 3.3% rise Hassan says “private sector houses are taking a sharp leg lower despite recent firming in finance figures”. He describes the October figures as “disconcertingly weak”.
Private house building approvals declined 7.5% in October. They are down 15.4% for the year. Approvals for units declined 16.8% in October. They are down 44.6% for the year.
The industry body the Master Builders Australia (MBA) says the October figures highlight the negative trend that developed one year ago is worsening.
Peter Jones chief economist at the MBA says “the immediate challenge is to restore confidence and drive a private sector recovery in the building sector. The residential building industry is banking on further rate cuts to “help boost confidence and stabilise an uncertain market”.
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