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Fall in building approvals clouds the outlook for ASX REIT investors

A fall in April’s building approvals by 5% was the result of a steep decline in apartment approvals. The outlook for the Australian housing market is mixed with some in-demand new projects in the pipeline, while residential property prices have already started to fall.
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Over the year there is expected to be an oversupply of apartments and tighter lending standards, which will contribute to further softness in prices. 

Government data has already shown that lending to housing investors was down 9% in March.

Australian REITs operating in the residential housing market, especially those that develop apartments, will be under pressure and are likely to see further weakness in prices and demand over the next few years. Stockland Corporation Ltd (ASX: SGP) was downgraded to a sell by UBS based on the weaker outlook. Mirvac Group  (ASX:MGR) and Lendlease Group (ASX :LLC), are also involved in the residential housing market.

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Motley Fool contributor Rosemary Steinfort has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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