Housing Construction Finance Stalls

Wednesday, October 16th, 2013
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In a discouraging sign for the building industry in Australia, the latest data suggests the pace at which finance has levelled off, and has done so at a level industry commentators feel is not sufficient to underpin a strong home building recovery.

On a seasonally adjusted basis, the combined number of loans made for the purchase or construction of new homes (owner-occupied housing only) eased back 0.10 per cent in August to come in at 8,347, as a 2.2 per cent rise in the number of loans made to developers for construction of homes (5,393) was more than offset by a four per cent drop in those made to consumers for new home purchases (2,954).

This means following a recovery late last year, growth in new housing finance has stalled over the past six months, albeit with the pace at which loans for new housing are being made remaining near its highest level since January 2010.

Indeed, even though the number of loans made for buying or building new homes was up 13.3 per cent over the three months to August compared with the same period in 2012, it was up just 0.3 per cent compared with the three months to June this year.

“Compared with twelve months ago, new home lending activity has increased markedly” Housing Industry Association senior economist Shane Garrett said. “However, growth has completely stalled over the past six months even though activity was already rather low by historical standards.”

In terms of states, overall housing finance commitments (new and existing homes) rose by 2.3 per cent in New South Wales, 2.2 per cent in Victoria and 0.1 per cent in Tasmania but plummeted 8.6 per cent in South Australia and dropped 3.2 per cent and 1.3 per cent in Queensland and Western Australia respectively.

The latest data follows the release of statistics on Friday showing a 10 per cent jump in the number of housing starts which took place last year, with commencements rising from 144,870 in 2011/12 to 161,043 in 2012/13 as low interest rates underpinned higher levels of buyer demand.

This year, however, the HIA expects housing start numbers to drop back to 150,570.

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