Building loans remain at 15 year low, HIA warns

NEW HOME construction loans are at similar low levels to those experienced during the onset of the Global Financial Crisis (GFC) in 2008, according to the Housing Industry Association of Australia. (HIA).

“Lending for the purchase or construction of a new home remains at its lowest level in 15 years,” HIA chief economist, Tim Reardon said this week.

The Australian Burean of Statistics (ABS) released the Lending to Households and Businesses data for March 2023 on Friday.

“The number of loans issued to purchase or construct a new home remained stable in March compared to the previous month, to be 30.7 percent lower than at the same time last year,” Mr Reardon said.

“The last time so few loans were issued for the purchase or construction of a new home was in November 2008, when the GFC caused a contraction in building.

“This data confirms that ongoing and significant declines in new home sales will see new home commencements slow significantly in the second half of 2023, under the weight of the higher cash rate. There are very long lags in this cycle and the full impact of the RBA’s rate increases are still to fully hit the housing market, let alone the broader economy.

“The weak lending figures observed by the ABS in March will not be apparent in other economic indicators until 2024, when the volume of homes under construction declines more markedly. Given these long lags, the RBA shouldn’t be waiting to see unemployment rising before pausing the increase in the cash rate. 

“This month’s data does show that the value of lending for renovations and to owner occupiers and investors increased marginally compared to the previous month, contrary to the trend of the past year," Mr Reardon said.

"“Total new lending increased in March 2023 compared to the previous month by 4.9 percent, to be 26.3 percent lower than at the same time last year. This pick up in lending is likely to be short lived as the weight of interest rate increases continues to constrain confidence,” Mr Reardon said.

In original terms, the total number of loans for the purchase of construction of new homes in March 2023 declined in almost all jurisdictions compared with the same month a year earlier, led the Australian Capital Territory (-37.3 percent), Ne w South Wales (-36.3 percent) and Tasmania (-33.0 percent), followed by Western Australia (-30.6 percent), South Australia (-29.7 percent), Victoria (-28.0 percent), and Queensland (-21.8 percent). The Northern Territory saw the only increase, up by 26.1 percent over the year.



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