The downturn in Australia’s housing construction sector continues to deepen, two new sets of data show.

Released on Friday and on Monday respectively, March monthly data in respect of construction lending and building approvals shows that the volume of new work coming into the residential construction sector has stabilised but remains near its lowest level in many years.

In terms of lending, the data shows that the number of new loans that were made during March remained virtually unchanged (up 0.2 percent) from last month’s fifteen year lows and now sits at  a very low level of 4,280 on a seasonally adjusted basis (see chart).

Meanwhile, seasonally adjusted dwelling approvals contracted by a further 0.1 percent during March to come in at 12,686 – the second lowest level since July 2012.

The latest data follows last week’s move by the Reserve Bank of Australia to increase official interest rates by a further 0.25 percent from 3.60 percent to 3.85 percent.

In a statement accompanying its decision, the bank said that inflation remained too high and that it would be some time before inflation returned to its target range.

Housing Industry Association Senior Economist Tom Devitt said a decline in detached home approvals reflected a lagged response of Australian home-buyers to the RBA’s interest rate hiking cycle.

He warns that further declines in detached house demand will be reflected in the figures over coming months as the full impact of the rate rises continues to flow through.

In the multi-unit sector, Devitt says that new project activity is being impacted by construction cost blowouts, labour uncertainties, greater compliance costs and taxes on investors.

He warns that the decline in new housing activity is occurring even as population growth surges with the return of overseas migrants, students and tourists.

Such an imbalance will see housing and rental affordability deteriorate further, he says.

Master Builders Australia CEO Denita Warn called for the government to address the housing crisis whilst also being fiscally responsible in the Commonwealth Budget.

“The government has an opportunity in tomorrow’s budget to be fiscally responsible and target measures to alleviate the housing crisis,” Wawn said in a statement on Monday.

“The budget needs to ensure that carefully targeted spending boosts productivity for business and allows for more favourable outcomes when it comes to the cost, quality and quantity of building and construction output.

“We hope the Senate reviews today’s data as they debate the Housing Australia Future Fund this week. Parliament has an opportunity to send the right signal and kick-start a vital piece of housing reform.

“We know some members of the crossbench are looking for more funding, and while that would be welcome, it cannot come at the expense of doing nothing at all as each month of building data heads in reverse.

“There is no silver bullet to solving the housing crisis in Australia. There are a multitude of levers that the federal, state and local governments can pull.”

 

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