Home building activity in Australia looks to have peaked and is set for a slowdown after dwelling approval figures fell 5.2 per cent for the month of May.
According to Australian Bureau of Statistics figures just over 227,000 dwellings were approved in the 12 months to May seasonally adjusted.
Approvals for apartments, townhouses and semi-detached housing suffered the biggest fall in approvals.
The dwelling approval rate fell across the country despite there being an interest rate cut which would usually create a stimulus effect.
The RBA left interest rates on hold this month but indicated there may be further rate cuts in the near future.
ANZ economist Kieran Davies told Australian Financial Review the figures were surprising.
“The fall in May exceeded expectations, unwinding two months of solid gains,” he said.
“We think that housing activity is nearing a broad peak, although construction should stay at a high level given affordability is still favourable and with a record 13 months of work yet to be done.”
Dwelling approvals are often good indications of future sales and construction activity in the housing market.
Housing Industry Association figures recorded a 4.7 and 4.4 per cent fall in new home sales in April and May respectively and residential construction was at its slowest growth rate since 2014.
Senior economist at HIA, Shane Garrett, also spoke to the Australian Financial Review.
“May approval figures fit closely with our view that new home building activity is in the process of declining from last year’s record peak to more modest levels as the end of the decade approaches,” he said.
“The contraction in activity is predicted to be concentrated on the multi-unit side, with a more measured reduction in detached house building.”