Approvals for private sector houses have fallen to their lowest point in 10 years as easing property prices and high building costs continue to weaken demand for new homes.
House approvals fell by 13.8 per cent in January, down for the fifth month in a row, Australian Bureau of Statistics data shows.
Sign off on private sector dwellings excluding houses, which is typically a more volatile series, sunk 40.8 per cent, largely unwinding the 41.9 per cent uptick in December.
Overall, total dwelling approvals fell 27.6 per cent in January after a glut of large apartment projects drove a 15.3 per cent lift in December.
All states except Queensland recorded a decrease in total dwelling approvals, with apartments driving the 25.6 per cent lift in the sunshine state.
The value of total building approvals fell 18.6 per cent, following a one per cent increase in December.
A large pipeline of home-building work has been keeping the construction industry busy but CreditorWatch chief economist Anneke Thompson said the incoming slowdown in new home completions would start to bite mid year.
She said the slowdown in housing completions would flow through to lower sales in the furniture, white goods, and electrical goods categories, adding to the challenging outlook for the retail sector.
While most retailers reported strong earning in the second half of 2022, groups like Adairs, JB HiFi and Baby Bunting have all raised concerns about higher living costs and interest rates eroding spending power.
"This year we will see the impact of many more consumers having less to spend each month, as up to 800,000 fixed rate loans on very low interest rates will convert to variable rate loans," Ms Thompson said.
Commenting on national accounts figures released on Wednesday, Master Builders Australia chief executive officer Denita Wawn said rising inflation was weighing on construction activity.
"As inflation rises, fewer projects can be done for the same amount of capital," she said, with the subsequent lifts in interest rates also working to reduce the spending power of consumers.
"With housing affordability already a major challenge, high inflation threatens to lock a generation out of home ownership and add to housing supply and affordability challenges."
