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Home building loans hit lowest since GFC amid rate hike squeeze


The Australian housing sector is grappling with a concerning decline in new home construction loans, hitting lows not seen since the global financial crisis. This is amidst the Reserve Bank of Australia’s (RBA) ongoing pressure of rate hikes, negatively impacting the volume of work entering the building pipeline.

Tim Reardon, the Housing Industry Association’s (HIA) Chief Economist, has expressed alarm over the situation. “In the face of an acute shortage of housing stock, the rise in the cash rate has seen the volume of work entering the pipeline contracting for more than two years,” he said.

Fresh data from the Australian Bureau of Statistics (ABS) has revealed a slight increase in lending for new home constructions and purchases in October 2023, rising by 1.8 per cent from the previous month. Despite this marginal uptick, the overall lending figures are down by a significant 22.4 per cent compared to the same period in the previous year.

Mr. Reardon highlighted the gravity of the downturn in his statement. “This leaves lending for the construction and purchase of a new home 22.4 per cent lower than at the same time the previous year and at their lowest level since the GFC,” Reardon remarked.

The sustained low volume of lending since earlier in the year hints at a continued slowdown in new home construction through to 2024, contradicting the essential need to bolster the supply of new homes.

In a forewarning tone, Mr. Reardon criticised the timing of the rate raise, saying: “This poor result was recorded before the rise in the cash rate in November. There is no justification for further rate increases.”

The RBA’s decision to raise the cash rate has been met with calls for restraint from the housing industry, urging a pause to allow for the full impact of the hikes to permeate through the economy. Mr. Reardon underscored that the increase in rates not only complicates the issue of housing shortage but also forebodes the loss of skilled tradespeople from the building industry, which could severely hinder the recovery of home building activity.


“The industry requires stable and reliable economic settings to avoid an ongoing market roller coaster,” Mr. Reardon concluded, emphasising the need for predictability in economic policies to nurture a healthy home building sector.

A breakdown of the ABS data further illuminates the situation, showing declines in new home loans across all jurisdictions over the three months leading to October 2023. This downward trend is most pronounced in the Northern Territory, with a staggering 58.2 per cent drop, followed by the Australian Capital Territory at 53.6 per cent. New South Wales and Tasmania saw a decrease of around 29 per cent, and other territories like Victoria, Queensland, South Australia, and Western Australia also experienced significant declines.

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