Residential dwelling investment may have peaked in the current property market cycle, according to the Reserve Bank, which reports that investment in the sector is lower than in late 2016.
According to the latest RBA Statement on Monetary Policy, residential building approvals have been lower over the past year than they were over the preceding two years, particularly for higher density housing.
Demand for off-the-plan apartments in the major east coast cities has moderated, reflecting weaker demand from foreign buyers and domestic investors.
The RBA says that even though the level of residential building approvals has declined, dwelling investment is likely to remain at a high level for the next year or so because of the large pipeline of work already approved or underway.
The RBA also reports that housing credit growth has eased a little and the profile of new lending has shifted away from interest-only and other riskier types of lending. This suggests that recent prudential measures are helping address risks in household balance sheets.
Household debt remains high, however, and continues to increase faster than household income.
With consumption growth holding up over the past few years, despite lower income growth, the share of households’ income that is saved has declined.
The decline has been concentrated in the mining states, where income growth has been weaker over this period. These states had previously recorded larger increases in their savings ratios during the 2000s, when their income growth was relatively strong.
Household savings ratios have been relatively stable in New South Wales and Victoria.
Wages grew by a little less than 2 per cent over the year to June. Spare capacity in the labour market continues to contribute to low wage growth.
The unemployment rate, at 5.5 per cent, remains somewhat above the RBA’s estimate of the rate consistent with full employment and a considerable fraction of employees would like to work more hours.
Other factors associated with low wage growth include concerns about job security, changes in relative bargaining power, technological change and increased competitive pressures from the internationalization of services trade.