Housing construction lending activity across Australia has edged up but remains at extremely sluggish levels, new data suggests.

Published by the Australian Bureau of Statistics, monthly lending data indicates that the seasonally adjusted number of new loans that were approved to owner occupiers for the purpose of either constructing a new dwelling or purchasing a newly erected dwelling edged up by 3.6 percent in February to come in at 4,331.

At this level, housing construction lending activity remains extremely low by recent historic standards (see chart).

Since the early part of last year, lending to purchase or construct new homes has remained stubbornly low at levels which have generally not been seen since before the Global Financial Crisis.

The latest data come as earlier data released last week showed that building approvals in the multi-residential sector came in at decade lows in February.

The low levels of lending and approvals are expected to fed through into sluggish conditions across the residential construction sector throughout much of 2024.

This is the case notwithstanding that extremely low levels of rental vacancies signal a severe underlying shortage of housing.

The Domain web site has reported that national rental vacancy rates fell to record lows of 0.7 percent in February.

Housing Industry Association Chief Economist Tim Reardon said that the current downturn in home lending has been deeper and more sustained compared with any other period over the past twenty years.

He said the slowdown in activity is being primarily driven by higher interest rates.

This has compounded the rise in construction costs which is caused by elevated levels of cost for land, labour and materials.

Reardon said the slowdown in lending activity has been most evident in New South Wales and Victoria.

In both of these states, the number of loans issues for the purchase or construction of new homes has fallen by around one third since the current round of interest rate hikes began in May 2022.


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