The decline in new residential building activity throughout Australia appears to have stabilised, new data shows.

But the pace at which new work is coming in remains at sluggish levels.

On Tuesday, the Australian Bureau of Statistics released new monthly data in relation to both lending activity and building approvals.

On lending, the seasonally adjusted number of loans that were made to owner occupiers for the purpose of either constructing a new home or purchasing a newly built home edged up by 2.9 percent in June to come in at 4,435.

This represents the second consecutive month of housing construction lending increase and provides further confirmation of a stabilisation in lending activity which has taken place hold since February (refer chart).

That said, construction lending activity remains close to its lowest levels since the Global Financial Crisis (see chart).

Whilst seasonally adjusted building approvals dropped by 7.7 percent, meanwhile, this was not unexpected as it represents a partial reversal of a spike in approvals within the statistically volatile multi-residential sector which occurred during May.

Approvals in the more stable detached house sector contracted by 1.3 percent.

As with housing construction lending, a stabilisation in dwelling approvals appears to have taken hold on a trend basis (which strips out statistical monthly volatility) since January following significant declines in the second half of last year (see chart).

Put together, the two data sets point to a stabilisation in the pace at which new projects are coming into the market for new home construction.

This is taking place as the Reserve Bank of Australia left the cash rate unchanged at 4.10 percent at its August monthly meeting.

In a statement, the board said that whilst inflation remained too high, the runup in interest rates which has taken place over the past fifteen months has established a more sustainable balance in supply and demand across the economy.

Although some further increases in interest rates may be needed, the bank indicated that this will depend upon further data along with the RBA’s evolving assessment of risks.

Whilst the stabilisation of approvals and construction lending is encouraging, concerns remain that the latest data may not fully reflect the impact of recent interest rate rises.

This is because there is often a time-lag before interest rate hikes are fully reflected in approval and lending data.

Moreover, the low level of approvals and loans point to a subdued outlook for new home construction in the near term.

All up, Oxford Economics Australia expects the number of dwelling starts throughout Australia to contract from an expected 167,400 in 2022/23 to 146,800 in 2023/24.

This would represent the lowest number of dwelling commencements since 2011/12.

Enjoying Sourceable articles? Subscribe for Free and receive daily updates of all articles which are published on our site

Want to grow your sales, reach more new clients and expand your client base across Australia’s design and construction sector?

Advertise on Sourceable and have your business seen by the thousands of architects, engineers, builders/construction contractors, subcontractors/trade contractors, property developers and building industry suppliers who read our stories across the civil, commercial and residential construction sector