The number of loans issued for the purchase or construction of new homes declined by 9.7% in July 2023, to its lowest level in 15 years. Source: Timberbiz
“This is the weakest monthly performance since the Global Financial Crisis and leaves the three months to July 31.7% below the same quarter last year,” HIA Senior Economist Tom Devitt said.
“The previous year of interest rate increases from the RBA has compounded the surge in construction costs during the pandemic, drying up the pipeline of new homes awaiting construction around Australia.
“This has all but guaranteed a decade low trough in detached house commencements for the coming year.”
Mr Devitt said a recovery from late next year should be supported by strong market fundamentals, including record population growth, acute shortages of rental accommodation, and a strong labour market.
“The recovery will, unfortunately, be limited by the deterioration in housing affordability which will only exacerbate the housing crisis across Australia,” he said.
“The HIA Affordability Report for the June Quarter 2023 highlights the alarming speed at which affordability deteriorated in just one quarter, with the Affordability Index falling by 8.7% nationally.
“Purchasing a home is the least affordable it has been since just before the GFC, 15 years ago.”
Mr Devitt said that soaring mortgage rates and recovering dwelling prices meant that the average Australian income earner would now have to commit half of their income to the service of a typical new mortgage. In Sydney, they would have to commit more than two-thirds of their income.
“This deterioration in affordability will act as a handbrake on any recovery in home building,” he said.
“If the ambitious target of building 1.2 million new homes in five years is to be achieved, policymakers need to act quickly.
“Changes to planning, regulatory and tax systems are needed to bring down construction and finance costs and facilitate greater investment in housing near jobs and transport.”
In original terms, the total number of loans for the purchase of construction of new homes in the three months to July 2023 declined in all jurisdictions compared to the same quarterly period a year earlier, led by the Australian Capital Territory (-61.1%), and followed by the Northern Territory (-53.4%), South Australia (-37.3%), New South Wales (-32.8%), Tasmania (-32.6%), Victoria (-29.7%), Queensland (-26.0%) and Western Australia (-24.1%).
