SYDNEY • Australia's home-building boom is starting to look old in the tooth just when its economic benefits are sorely needed to offset slumping mining investment, a possible harbinger of tougher times this year.
Alarm bells rang yesterday when government data showed approvals to build new homes dived 12.7 per cent in November, far beyond market forecasts and the biggest drop since late 2012.
The main culprit was the multi-unit sector where approvals fell a startling 23 per cent to the lowest in over a year.
High-rise developments have been a star performer in recent years, partly driven by red-hot demand from Asia, but analysts worry demand will not keep up with supply, leaving a glut of unsold apartments.
Home prices have already come off the boil in the biggest cities of Sydney and Melbourne in the face of poor affordability and tighter lending standards by banks.
"High density approvals are inherently volatile, so a bounce back in approval volumes in December cannot be ruled out," said Mr Tom Kennedy, an economist at JPMorgan. "That said, the peak impulse from residential construction to real economic growth has clearly passed and we expect aggregate approval volumes to slide in 2016."
The Reserve Bank of Australia has been counting on the housing industry to help fill a gap left by mining.
Residential construction accounted for a fifth of the 2.5 per cent growth achieved by the economy in the year to September, a result still considered sub-par overall. Home-building activity also spills over into many other sectors, from employment to retail spending and finance.
A downturn would come at a particularly bad time as prices for many of Australia's major commodities have begun the new year under renewed pressure, darkening the outlook for export earnings.
Data from the Australian Bureau of Statistics out yesterday showed the country ran a trade deficit of A$2.9 billion (S$2.93 billion) in November, in large part due to lower prices of key resources such as iron ore.
One bright spot was a 146 per cent jump in exports of fresh fruit and vegetables in November to A$356 million, a sector expected to benefit substantially from free trade agreements Australia signed last year with Japan, South Korea and China.