A little while back, I wrote about the pros and cons of investing in houses vs units. As previously outlined, the preference to buy a house or unit depends on individual investor preferences and goals during ownership. As an investor, it is interesting to note the number of building approvals and sales for houses and units.
Each month, the Australian Bureau of Statistics (ABS) releases the number of building approvals for dwellings in Australia. The number of building approvals per month can indicate how the property market and building industry is fairing.
In April this year, there was a surprise fall of 5.6 percent of total dwellings approvals to 14,931 (seasonally adjusted). This was the third consecutive month of decline this year, after reaching a decade high in January.
Positively, when compared to last year, the overall number of approvals is still up by 1.1 percent (seasonally adjusted).
Multi-unit dwelling approvals were down by 14 percent, which has greatly impacted the recent overall decline in building approvals. Conversely, the approvals for houses were down only 0.3 percent.
There has also been a declining trend in the value of total buildings approved over the past five months and in April it fell by 5.6 percent. Residential building values falling only 1.8 percent and the value of non-residential building fell 12.8 percent.
Good news is that the annual pace of growth remained solid at 16.5 percent in the year to April 2014.
With the decline in approvals in mind, the Housing Industry Australia: New Home Sales data for April is however showing an increase in sales of 2.9 percent, the fourth consecutive rise for new home sales this year!
The main driver for the overall increase was a rise in multi-unit sales of 9.3 percent and a 1.8 percent rise in detached house sales.
Although multi-unit sales over the past three months have fallen by 6.7 percent, it is still up by 12.3 percent compared to the same quarter last year.
In the five mainland States, the volume of detached house sales has grown when compared to last year, recording an increase of 8.5 percent over the April 2014 quarter, which is 27.9 percent higher than for the same quarter last year. Quarterly gains were evident in the four out of five mainland States with South Australia being the exception.
Overall, it seems the property market maybe starting to cool and with the reduction in dwelling approvals this may influence the RBA to leave the official cash rate on hold in coming months. If so, the continued low interest rates will continue to support demand for housing and residential construction activity over the course of the year.