The total number of building permits issued in Australia jumped 18.5% in December, coming in at 16,556, the Australian Bureau of Statistics said. That was in line with expectations following the 8.8% drop in November.
Building permits are key indicator of demand in the housing market. Permits for private sector houses dropped 2.3% to 8,903, while permits for private sector dwellings excluding houses surged 56.6% to 7,091.
On a yearly basis, private sector house permits sank 11.7% while private sector permits excluding houses increased by 2.9%, so overall permits lost 3.8%.
By state, the number of dwellings went up in New South Wales (48.4%), Victoria (20.7%), Queensland (8.3%), and Western Australia (6.4%). Decreases were recorded in Tasmania (-49.7%) and South Australia (-24.6%).
Within two months of the Reserve Bank Australia’s first interest rate hike in May 2022, leading indicators of building activity, including new home sales, started to decline. Investors, first home buyers and owner-occupiers started retreating from the housing market
The RBA raised the cash rate by 25bps to 3.35% on Tuesday (Feb. 7). The move was the ninth rate hike since May last year, which brought borrowing costs to a level last seen in September 2012. A total of 325bps increases also marked the sharpest annual tightening since 1989. The board reiterated further hikes would be needed as inflation in Australia remained too high.
“Global inflation remains very high” RBA governor Philip Lowe said in the accompanying statement. “It is, however, moderating in response to lower energy prices, the resolution of supply-chain problems and the tightening of monetary policy,” Lowe said. “It will be some time, though, before inflation is back to target rates” of 2%-3% over time.
The annual inflation rate in Australia climbed to 7.8% in final quarter of 2022 -the highest in more than 32 years, even with three full percentage points of rate rises by the RBA by then-and above market forecasts of 7.5%. This was the highest print since Q1 1990, boosted by rising costs of food, automotive fuel, and new dwelling construction.
