AFTER two consecutive months of gains, the number of dwellings approved fell 7.6 per cent in October 2012, in seasonally adjusted terms, according to the latest data released this week by the Australian Bureau of Statistics (ABS).
Dwelling approvals decreased in October in Victoria (-14.2 per cent), Queensland (-7.0 per cent) and South Australia (-0.1 per cent) but increased Tasmania (11.0 per cent), New South Wales (3.2 per cent) and Western Australia (0.1 per cent), in seasonally adjusted terms.
In seasonally adjusted terms, approvals for private sector houses fell 1.5 per cent in October. Private sector house approvals rose in New South Wales (5.5 per cent) but fell in South Australia (-7.9 per cent), Victoria (-4.5 per cent), Queensland (-2.4 per cent) and Western Australia (-1.3 per cent).
The value of total building approved fell 6.7 per cent in October, in seasonally adjusted terms, after also having increased for two months. The value of residential building fell 12.9 per cent while non-residential building rose 6.7 per cent.
The Housing Industry Association (HIA) said the 7.6 per cent decline in October is a reminder that the prospects for recovery remain fragile.
HIA Chief Economist, Harley Dale, said that while the monthly drop in approvals in October is disappointing, it is the ongoing weak profile that should be of most concern to policy makers.
"Over the three months to October approvals increased in Western Australia, but fell everywhere else," Mr Dale said.
"Meanwhile, over the three months to October compared to the same period in 2011, approvals increased for semi-detached dwellings and units of one or two storeys, but were flat for detached houses and fell heavily for medium/high density units."
"That kind of profile doesn't give you a sustained recovery in new residential construction and certainly doesn't give you a signal of a sector poised to help fill the void left by a turnaround in the mining investment cycle," Mr Dale said.
Mr Dale said lower interest rates should improve new housing conditions, but also said there is an urgent need for government policy to focus on investment and taxation reform to boost new housing supply.
Master Builders Australia said that early signs of a recovery in the residential building sector have been dented following the release of the October building approvals figures, adding that the size of the fall came as a surprise to the building industry.
Wilhelm Harnisch, Chief Executive of Master Builders Australia, said the setback in building approvals do not augur well for a housing recovery in early 2013, with the fall in approvals confirming that new home buyers and investors remain cautious and conservative.
"It puts at jeopardy the Reserve Bank of Australia's statements that the housing sector can fill the void lifting the Australian economy following from the resources boom, certainly in 2013," Mr Harnisch said.
"Building approvals need to be much stronger than they currently are if housing is to become the growth sector in terms of GDP and employment in the economy, following the resources boom."
The Reserve Bank of Australia (RBA) this week decided to reduce the cash rate by 25 basis points to 3.0 per cent.