Australia’s downturn in residential building appears to have deepened as the latest data suggests that lending to finance the purchase or construction of new houses and apartments has reached its lowest level in almost fifteen years.

Published by the Australian Bureau of Statistics on Friday, the monthly Lending Indicators data indicates that the seasonally adjusted number of loans which were approved to owner occupiers to finance either the construction of a new dwelling or the purchase of a newly erected home fell by 9.7 percent in July to come in at 3,950.

At this level, the number of loans was at its lowest since August 2008 and was at the second lowest level on record since the ABS lending dataset began in 2002.

On a quarterly basis, loan approval numbers over the three months to July came in 31.7 percent lower compared with the number of loans that were approved over the three months to July 2022.

The latest data comes as the market for new home construction is being impacted by the Reserve Bank of Australia’s cycle of monetary policy tightening which has seen official interest rates rise from 0.1 percent in April 2022 to their current level of 4.1 percent.

The data follows earlier figures released on Wednesday which showed that residential building approvals dropped back by 10.6 percent on a seasonally adjusted basis in July – albeit with this decline being attributable to a 15.8 percent fall in the statistically volatile multi-units sector following a bounce in that sector that occurred over May and June.

At 12,668, seasonally adjusted approvals registered their third lowest reading since July 2012.

Housing Industry Association Senior Economist Tom Devitt said that the latest data signaled challenging conditions for new home construction over the near term.

“The previous year of interest rate increases from the RBA has compounded the surge in construction costs during the pandemic, drying up the pipeline of new homes awaiting construction around Australia,” Devitt said.

“This has all but guaranteed a decade low trough in detached house commencements for the coming year.

“A recovery from late next year should be supported by strong market fundamentals, including record population growth, acute shortages of rental accommodation, and a strong labour market.”

Whilst the outlook for new home construction appears to be challenged, that relating to the renovation of established properties continues to run hot.

At $492 million, the seasonally adjusted value of new loans which were approved to owner occupiers for the purpose of renovating established homes fell by 2.4 percent in July but remains well above any level seen prior to the commencement of the Commonwealth HomeBuilder program.