Dwelling approvals and loan commitments drop

The Reserve Bank of Australia may have kept interest rates on hold this week, but that hasn’t stopped property industry experts from hitting out at the central bank, after the latest lending figures showed the number of loans for buying and building a new home has dropped alarmingly.

According to the latest figures from the Australian Bureau of Statistics (ABS), lending activity remains well down on the busy pace seen in 2022, with new loan commitments for housing falling 1 per cent, to $24.6 billion, in June.

Annually, the figure is even bleaker. 

“Compared to a year ago, the value of new housing lending in June was down 18.2 per cent compared to the same time last year,” PropTrack Economist Angus Moore said.

The data also showed that the number of new loan commitments for the construction of new dwellings is 35.8 per cent lower than it was a year ago, while the number of new loans for the purchase of newly built dwellings is down 11.2 per cent. 

“The number of loans issued for the purchase and construction of a new home has fallen to their lowest level since 2008, and the number of detached building approvals has fallen to its second lowest month since 2013,” HIA Chief Economist Tim Reardon said.

“This is despite the urgent need to increase the supply of new homes.”

The ABS also released the data on the number of building approvals for detached

houses and multi-units for June, showing the total number of dwellings approved fell 7.7 per cent in June, in seasonally adjusted terms.

“The fall in total dwellings was driven by the volatile private dwellings excluding houses series, which fell 21 per cent,” ABS Head of Construction Statistics Daniel Rossi said.

“Approvals for private sector houses decreased 1.3 per cent, following a 0.8 per cent rise in May.”

Mr Reardon said when the RBA started increasing interest rates in 2022 there was a record volume of new homes being built, as well as a record number approved but not started.

“This large volume of work in the pipeline has obscured the adverse impact of rising rates on the wider economy,” he said.

““Compounding the rise in the cash rate, increased government regulatory costs, rising land prices and construction costs are further impeding an increase in the supply of new homes.

“This lack of new work entering the pipeline threatens to worsen the affordability crisis.

“Australia has a structural undersupply of housing, with rental vacancy rates around the country at record lows, driving rents and dwelling prices to new heights.”

Master Builders Australia CEO Denita Wawn agreed, saying the impact of interest rate rises exacerbating the housing crisis could be clearly seen.

“Attention needs to be turned to addressing the structural undersupply challenges of the housing market,” she said.

“The rental market is feeling the brunt of this pressure with higher-density home building approvals sinking by 21.0 per cent in June. 

“New apartment and unit building is a key source of new supply for Australia’s rental market. 

“These results come on top of last week’s figures showing that rental inflation has shot to its highest rate in 14 years. 

“Sadly, the uptick in higher density approvals in May was short-lived with approvals returning to low levels since before the pandemic.” 

Ms Wawn said many new home building projects were failing to get off the ground due to a combination of high costs and falling investment appetite, inflamed by rising rates.

“We need to see governments working to make it easier for new projects to get the green light by kickstarting private investment and reducing development costs and delays,” she said.

“Taxes, regulations and the industrial relations environment all have an impact on the cost of construction. 

“The building and construction industry continues to implore the Opposition and crossbench to pass the Housing Australia Future Fund legislation.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.

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