Dwelling approvals took another hit in February, according to ABS figures, signifying an ongoing downturn in the housing construction industry.

In seasonally adjusted terms, the total number of residential building approvals fell by 7.4% in February, following a decline of 11.6% decline in January.

These figures contributed to a drop in dwelling approvals of 13.7% during the three months to February when compared to the same period a year earlier.

“February’s approval figures are disappointing and confirm that the recent weakness seen in building approvals has much more to do with the overall economic and policy environment than it does to the weather-related events of late 2010 and early 2011,” said Housing Industry Association senior economist Andrew Harvey.

“There is no doubt the November 2010 interest rate hikes by the Reserve Bank and the trading banks have acted like a wrecking ball on residential building across Australia, with the impact being compounded by tighter credit conditions and the winding down of the Social Housing Initiative which has now all but concluded.”

Commenting on the ABS figures, Master Builders Australia warns that Australia is in dire need of an uplift in construction if the country is going to address its increasing supply shortage, with the organisation’s chief economist, Peter jones, estimating that the current annualised rate of 144,000 approvals needs increase by at least 50%.

"A long and strong residential building upturn is desperately needed in Australia given the underbuilding of the past seven years," said Jones.

"The much anticipated upswing in residential building activity is in doubt as householders face not only higher mortgage repayments but artificially high barriers to the purchase of new or newly built houses in the form of inefficient developer levies."

The main loser according to the ABS’s February figures was Victoria, which recorded a 23.1% decline in seasonally adjusted terms.

Queensland (-11.8%) and Western Australia (-7.4%) also recorded a drop in dwelling approvals, while Tasmania (44.6%), South Australia (35.8%) and New South Wales (7.7%) saw increases in seasonally adjusted terms.