The near-term outlook for housing construction activity in Australia remains strong as new data shows that both lending for housing construction projects and approvals of new residential dwellings remain at healthy levels.

As the Reserve Bank of Australia lifts official interest rate again, the Australian Bureau of Statistics has released two sets of data which indicate that the pace at which new work is coming in for builders in residential construction remains strong by historic levels.

In terms of lending, the latest Lending Indicators data shows that on a seasonally adjusted basis, the number of loans that were made to owner-occupiers specifically to finance construction of a new dwelling edged up by 2.56 percent in June to come in at 4,436.

At this level, housing construction lending activity is below its peak during the HomeBuilder rush but remains higher compared with pre-pandemic levels in June 2019 to the tune of 22.5 percent.

Over the June quarter, the number of loans issued to finance new home construction was 19 percent above that for the June quarter in 2019.

Outside of new construction specifically, overall home lending dropped by 4.4 percent in June but remained at almost double pre-pandemic levels.

Meanwhile, seasonally adjusted dwelling approvals dipped by 0.7 percent in June but remained 9.3 percent higher over the June quarter compared with the same quarter in 2019 before the pandemic.

In home renovations, meanwhile, the value (in constant dollar terms) of work that was approved for large-scale additions and alterations over the June quarter ($3.042 billion) was 42 percent higher compared with pre-pandemic levels in the June quarter in 2019.

The latest data came as the Reserve Bank of Australia increased official interest rates by a further 0.5 percent to 1.7 5 percent.

In its statement, the bank said inflation would peak later this year before trending back toward the target 2-3 percent range over coming years.

It foreshadowed further increases in coming months but stressed that the timing and magnitude of these is uncertain and will be guided by incoming data and the board’s assessment of inflation and the labour market.

HIA Economist Tom Devitt said the latest data bodes well for new home construction activity.

Noting that the industry is reporting a slowdown in display home traffic, Devitt said rising interest rates along with construction cost pressures could see demand for new homes slow over the second half of the year.

Given the pipeline of homes currently under construction, however, there will be a lag between interest rate rises and any slowdown in housing construction activity.

“Every segment of the housing market remains elevated compared to pre-pandemic levels,” Devitt said.

“There were over $62 billion worth of loans to first home buyers in 2021/22, up by 69.1 per cent on 2018/19 levels. Loans to other owner-occupiers were up by 73.7 per cent and investor loans were double (+101.2 per cent).

“There was also $6.6 billion worth of lending for renovations in 2021/22, up by 165.0 per cent on three years earlier.

“The result is a record number of houses currently under construction, almost 80 per cent greater than pre-pandemic levels. There is also a large number of projects approved but not commenced, and sales have remained strong to the end of June.

“This will ensure that home building activity and demand for skilled workers will remain strong throughout 2023.”


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