The pace at which new work is coming into the residential construction sector in Australia continues to stabilise but remains extremely low by recent historic standards, two new sets of data show.
Released by the Australian Bureau of Statistics, September monthly data relating to housing construction lending activity and building approvals indicates that the pace of new housing and apartment projects stabilised during the month.
But activity remains extremely subdued by historic standards, indicating that the rate of new project flow remains weak.
In terms of lending, data released on Thursday shows 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 1.5 percent from 4,220 in August to 4,282 in September.
At this level, lending for such purposes has continued a stabilisation trend which has taken hold since February but remains at extremely low levels by historic standards (see chart).
Across the September quarter, the seasonally adjusted number of loans that were made to owner occupiers throughout Australia for either the construction of new dwellings or the purchase of newly erected dwellings came in at just 12,474.
This represents the lowest quarterly reading since the September quarter of 2008.
Meanwhile, building approval data released on Wednesday indicates that the seasonally adjusted number of dwellings that were approved for construction throughout Australia dropped back by 4.6 percent in September following an 8.1 percent jump in August.
As with housing construction lending, dwelling approvals have stabilised since February but remain at extremely low levels (see chart).
The latest data comes amid growing concerns that the Reserve Bank of Australia may opt for further increases in official interest rates.
That expectation follows not only the outbreak of the Israel/Gaza war but also an increase in core inflation which occurred during the September quarter.
As a result, Oxford Economics Australia expects at least two more rate hikes to occur in November and December.
Any further interest rate rises could further impact project flow in new home construction.
Housing Industry Association Senior Economist Tom Devitt said that the low volume of lending and approvals is likely to lead to a decade low volume of new housing starts in 2024.
Devitt says this could have impacts not only for the economy but also for hopes of reaching ambitious targets for housing supply.
“This low volume of lending and approvals will produce a decade low volume of new housing starts in 2024,” Devitt said.
“There are very long lags in this cycle due to the record high volume of building work that was in the pipeline when the RBA first raised rates in May 2022. The volume of houses under construction only started declining in the June quarter of 2023, and remains elevated, a year after the first increase in the cash rate.
“This large volume of building work has obscured the impact of these rate rises on the broader economy, especially unemployment, as the building industry employs over one million Australians.
“This slowdown in lending for new housing will make it increasingly difficult to reach the Australian government’s target of building 1.2 million new homes in five years.”
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