Australian construction trends continue to look bleak as the number of building approvals dropped again in November, led by a dramatic 54 per cent slump in apartment approvals.

Key points: Building approvals are facing a downward trend, down 33pc from November 2017

Building approvals are facing a downward trend, down 33pc from November 2017 Approvals fell in November in all states and territories except the ACT and Tasmania

Approvals fell in November in all states and territories except the ACT and Tasmania The slide coincides with a property price downturn, particularly in Sydney and Melbourne

Overall, building approvals have fallen by a steep 32.8 per cent since last year.

Approvals dropped 9.1 per cent in November compared to the previous month, to 15,465 (seasonally adjusted), as revealed by the latest Bureau of Statistics figures.

It was far weaker than what most economists had predicted — which was just a 0.5 per cent slip.

These figures are used to gauge the level of future construction activity in Australia, as obtaining government approval is one of the earliest steps required before building activity can start.

"Builders, unsurprisingly, are less keen to add to the residential pipeline in an environment of falling prices in Sydney and Melbourne," said NAB economist Kaixin Owyong.

"These data are consistent with business conditions in the construction sector declining from late 2017 peaks."

Biggest drops for apartment approvals

The weak result was driven overwhelmingly by a 17.9 per cent plunge in the number of apartment, town house and semi-detached building permits issued by local governments in November.

This figure is extremely volatile month-to-month as large projects tend to skew the figures, however the trend is unambiguously weak.

On a yearly basis, apartment approvals tanked by an even worse 53.9 per cent.

The more stable detached housing segment was also weak, with approvals falling 2.6 per cent over the month and 6.4 per cent since late-2017.

"The pull-back in approvals from historic highs is against the backdrop of softer demand, notably from investors (domestic and international), additional supply coming onto the market, and tighter lending conditions," according to Westpac's economics team.

"High rise developments, which have been a key driver of this cycle, are correcting lower with further falls ahead as suggested by weaker site purchases by property developers."

"The cooling of the housing market will weigh on the economic outlook for 2019, including a likely trend decline in new home building activity."

Despite that, the total value of buildings approved for construction lifted 1.5 per cent in November — primarily due to a strong rise in commercial building values (+11.1pc), even as residential building values retreated (-3.9pc).

Victoria had the biggest drop in building approvals, led a slump in apartment construction. ( NAB, ABS )

How did each state perform?

"All states and territories, except Tasmania and the ACT, are recording lower approvals over the past year," said Commonwealth Bank senior economist Belinda Allen.

"Each state is at a different point in their construction cycle."

NSW peaked in late-2016 and had fallen by about 15 per cent since then, while Queensland had fallen 21 per cent to date, she explained.

"These states [including Victoria] continue to be supported by faster growing populations and that should limit the downturn."

Victoria saw building approvals fall further than other states — down 14.6 per cent in November, led by 25.8 per cent plunge in apartment approvals, according to NAB's analysis.

"In trend terms, approvals in the states on the eastern seaboard continue to decline, led by NSW and Victoria as apartment approvals ease substantially" Ms Owyong said.