Housing market correction tipped to end

The housing market is still slowing but the correction phase of the cycle is coming to an end, economists said.
The Australian Bureau of Statistics said building approvals in Australia rose 1.8 per cent to 12,559 units in April, seasonally adjusted, from an upwardly revised 12,334 units in March.

In the year to April, building approvals fell 15.3 per cent.

UBS chief economist Scott Haslem said the data showed only a minor recovery from the 5.3 per cent fall in March.
“Approvals for private houses rose 0.2 per cent, which was the same as last month, while there was a 9.6 per cent rebound in medium-density dwellings after last month’s 21.2 per cent fall,” Mr Haslem said.
“The building approvals data is consistent with a 143,000 commencements pace, down from a 180,000 pace at the end of 2003.
“As we target about 137,000 for the trough, we are only looking for another 5 per cent fall, and we believe the housing correction is closer to the end than the beginning.
“We continue to look for an unchanged cash rate over the coming six months.”
RBC Capital Markets senior economist Michael Every said the fall in year on year terms of building approvals of 15.3 per cent is an improvement from the 19.1 per cent fall in March.
“Even so, a modest bounce from the rate-hike induced drop (in building approvals) in March was always a strong likelihood,” he said.

He said the building approvals still point to an overall trend decline in housing, which is in line with lower retail spending.

“This is given the link between the housing boom and consumer sentiment over recent years,” he said.

JP Morgan economist Jarrod Kerr said building approvals delivered a “dead cat bounce” in April.

“The data highlights that Australia’s housing market remains in correction mode, and that it is adjusting for the oversupply introduced in the past three years,” Mr Kerr said.
“We expect further falls in building approvals through 2005 and into 2006 as house construction cools.”