Building approvals have suffered their largest setback since September 2014 as the huge surge in high density dwellings eases.
Approvals for the construction of new homes fell 8.2 per cent in June, way worse than market expectations of a 0.9 per cent fall.
Over the 12 months to June, building approvals were up 8.6 per cent, the Australian Bureau of Statistics said on Thursday.
Approvals for private sector houses rose 4.3 per cent in the month, and the ‘other dwellings’ category, which includes apartment blocks and townhouses, was down 20.4 per cent.
JP Morgan economist Tom Kennedy said the underlying details in the building approvals figures aren’t that bad, but he doesn’t expect it to significantly strengthen again this year.
“It’s unlikely that you’ll see any further increase in approvals volumes, you’ll probably see them hover around the current levels for a while,” he said.
“But there are disincentives for investors, they will pull back and reconsider their options.”
CommSec economist Savanth Sebastian said the fall in the number of building approvals was not a surprise given the recent decline in the number of home loan approvals.
“We’ve only had one month, it is still a hot sector but there does seem to be a few cracks appearing,” he said.
“That significant price growth could curtail and looking towards the end of the year – it’s certainly not unfathomable that prices may come off a little bit.
“At present it’s not concerning because it was coming off some very high levels, but no doubt you’d want to see some healthy growth in supply, the last thing you’d want to do is limit your supply,” he said.
“You look at approvals now and they’re still up on a year ago, they’re still healthy, but it just highlights the impact on those regulations that are coming through.”
Mr Sebastian said it was concerning that the slide in approvals was across most of the states.