Housing takes a hit as building approvals fall

Australia's construction industry has suffered a setback as building approvals fell sharply in June instead of staging a rally.

Australia's construction industry has suffered a setback as building approvals fell sharply in June instead of staging a rally.

Nationally, building approvals fell 6.9 per cent, seasonally adjusted, over the month. It's the second consecutive month of decline and construction activity is now down 13 per cent on the same time last year.

Economists had tipped building approvals would rise 2 per cent in June after the Reserve Bank of Australia cut the cash interest rate to a record low of 2.75 per cent in May.

Shane Garrett, senior economist for the Housing Industry Association, said the figures were "very disappointing" in light of signs the housing market had been improving.

"It shows how housing activity in general is really quite vulnerable at the moment.

"We had reason to believe over the last six or nine months there was a bit of recovery under way in building, but these figures would put a question mark over that again," he said.

The HIA has reiterated its call for the RBA to cut the interest rate by a further 25 basis points to underpin the earlier signs of a recovery.

"The succession of interest rate cuts have had an important role in getting housing activity back up off the floor to a certain degree."

In Victoria, building approvals plunged by 24.3 per cent over the month, the country's worst performance by a wide margin.

Falls of 9.6 per cent were seen in South Australia, and 0.4 per cent in Western Australia. New South Wales and Queensland posted rises of 6.7 per cent and 7 per cent.

MacroBusiness economist Leith van Onselen said much of the falls were due to declines in building activity in the apartment market.

Nationally, apartment and unit approvals fell 12.6 per cent in June and were down 37.4 per cent over the year.

Detached homes declined by 1.2 per cent over the month but rose 9.9 per cent for the year.

Victoria alone witnessed a 40 per cent decline in unit and apartment approvals.

In NSW, they rose 19 per cent.

cvedelago@theage.com.au

Twitter: @chrisvedelago