Building approvals continue to slide as property sector waits on rates: Economy roundup

Australia’s housing market continued to struggle during July, with new data from the Australian Bureau of Statistics revealing the total number of dwelling approvals decreased by 2.3% in July, to be down 3.7% for the year.

Australia’s housing market continued to struggle during July, with new data from the Australian Bureau of Statistics revealing the total number of dwelling approvals decreased by 2.3% in July, to be down 3.7% for the year.

Private sector house approvals decreased 3.4% (and are now down 5.2% in 2008) while private sector other dwelling approvals fell by 2.3% (up 3.2% in the year).

ANZ economist Alex Joiner says that while the figures for July were soft, strong underlying demand for housing has supported the building sector.

“We have not seen a significant trough in the building cycle that has been characteristic of previous periods of higher interest rates.”

He expects today’s expected rate cut will help the property sector, but builders will want to be sure the RBA is in full rate-cutting mode before jumping back in.

“The sector is remaining watchful until it becomes clear the monetary policy cycle has turned permanently. We anticipate that further rate cuts in mid-2009 will be the catalyst for a turnaround of activity.”

On the local sharemarket this morning, investors have piled back into banking, retail and property stocks in anticipation of a rate cut.

The benchmark S&P/ASX200 index was up 37.5 points or 0.7% at 51551.7 points at noon AEST.