The decline in dwelling approvals in December almost completely offset the improvement recorded in November, according to Master Builders Australia .

MBA chief economist Peter Jones says “We are seeing a continuation of a saw tooth pattern as dwelling approvals struggle to bottom out after what has been to date a mild-downturn in housing.

“Today’s data mainly reflects a fall in Victorian approvals during December, a continuation of volatility linked with stricter environmental regulations introduced in July last year,” he says.

According to Jones, activity in residential building will only begin to stabilise as demand for houses gains some traction and the correction in the high density apartment market runs its course.

“With housing markets delicately poised, a stable interest rate policy from the Reserve Bank would help to avoid another ratchet down in dwelling approvals. Housing supply is currently not keeping up with underlying requirements and the gap is set to widen until approvals recover,” Jones says.

He added the total number of dwelling units approved, seasonally adjusted, fell by 3.5 per cent to 12,168 units in December, to be 8.9 per cent lower than the same month the previous year.

Private sector house approvals fell by 3.8 per cent to 8,258, down 3.3 per cent on the same month last year.

“The more volatile private sector ‘other dwellings’ (apartments and townhouses), fell by 0.6 per cent in December, and are 22.2 per cent lower than the same time the previous year,” Jones says.

Jones expects the trend decline in the number of apartments and unit approvals to continue to slow and eventually plateau as previously unsustainable levels of building unwinds.

“The latest figures for value of non-residential approvals remain positive, showing December 2005 quarter approvals increased by 21.4 per cent over December quarter 2004”, Mr Jones concludes.

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