In a further sign that housing construction conditions in Australia remain weak, the number of loans approved for either the construction of new homes or the purchase of new homes slipped back in May after showing some positive momentum in the previous months.
On a seasonally adjusted basis, the latest figures from the Australian Bureau of Statistics indicate that following consecutive increases in March and April, the number of loans approved for construction or purchases of new homes throughout Australia dropped back by 2.4 per cent in May.
For reasons not immediately apparent – in stark contrast to other forward-looking indicators for residential construction such as new home sales and residential building approvals, both of which are near their lowest levels in years – housing finance figures have remained reasonably stable over recent times.
Describing the latest figures as a ‘disappointing result’, Housing Industry Association chief economist Harley Dale acknowledges that new home lending figures have shown a general modest lift over the past few months, but says housing conditions remain weak.
He says the industry desperately needed to see a strong recovery in new home lending coming through in the first half of the year, but that has not happened.
“A modest lift is evident for new home lending over the three months to May this year and that is reflected in increases across all states and territories,” Dale says. “That is a more encouraging outcome, but the fact is new home loans have been grinding higher over the last 12 months rather than mounting a sustained and significant recovery.”
Dale says new home starts will hit levels equivalent to those experienced during the GFC, which bodes poorly for businesses, households and the Australian economy as a whole.
In terms of states, South Australia, where the seasonally adjusted number of new loans for construction and purchase of new homes surged by 9.9 per cent, was the standout performer in May. The next largest gains were recorded in the Australian Capital Territory (up 3.1 per cent), Queensland (up 1.7 per cent) and Tasmania (up 0.1 per cent).
On the flip side, monthly declines were recorded in the Northern Territory (down 23.8 per cent), New South Wales (down eight per cent), Western Australia (down 6.3 per cent) and Victoria (down 0.8 per cent).
On a brighter note, however, all states recorded seasonally adjusted increases in loans for purchase and construction of new dwellings over the quarter to May, with Tasmania (up 13.7 per cent) somewhat surprisingly leading the way.