New build recovery under way in Australia, latest ABS data suggests

Housing starts in Australia increased by 11.2% on an annual basis following two consecutive yearly declines, the latest data from the Australian Bureau of Statistics shows.

The number of new starts had declined by 5.9% and 11.1% in the two previous financial years, the data revealed.
Harley Dale, chief economist of the Housing Industry Association (HIA) which represents the residential building industry described the figures as healthy and shows that the first round of recovery for the new build sector is underway.

‘What is less encouraging is that all the growth occurred in the first half of the year, following which housing starts declined in the March 2013 quarter and held steady in June,’ he explained.

‘We now need to see an acceleration of growth in 2013/2014 reflective of a broad based recovery in housing starts. That outcome will require further upward momentum in New South Wales and Western Australia, together with a re-emergence of sustained growth in other markets,’ he added.

He pointed out that for that to happen there needs to be a sustained improvement in confidence, together with low interest rates. ‘The current regulatory and taxation environment combined with ever tightening credit conditions for residential development significantly dilutes the chances of securing this outcome,’ he said.

The June 2013 quarter data shows new starts were up 8% in Queensland, up 6% in South Australia, up 11.3% in Western Australia, up 15.6% in Tasmania and up 107.6% in the Australian Capital Territory. New build starts fell by 8% in New South Wales, by 2.2% in Victoria and by 15.1% in the Northern Territory.

In terms of the value of work done, the data showed a decline of 0.7% in new residential work done while the value of non-residential building work done eased by 0.3%. The value of larger alterations and additions increased by 4% in the June 2013 quarter.
Meanwhile housing finance data released by the ABS shows that new home lending slipped back during August. The number of loans advanced for the purchase and construction of new homes declined to 8,347 on a seasonally adjusted basis, a slight decline on the previous month’s result.

HIA senior economist Shane Garrett said it is a timely warning against complacency towards Australia’s housing market.‘Compared with 12 months ago, new home lending activity has increased markedly. However, growth has completely stalled over the past six months even though activity was already rather low by historical standards,’ he explained.

‘The patchiness we are continuing to see in areas of the home loans market means that another interest rate cut from the Royal Bank of Australia before the end of 2013 is important in order to ensure that the market recovery fires on all cylinders. Current policy settings have proven to be insufficient to drive a sustained recovery in new home lending and a renewed focus on housing policy reforms is needed to copper fasten the recovery,’ he concluded.

In the three months to August, the number of loans to owner occupiers for the construction and purchase of new homes rose by 0.3% and was 13.3% higher than the same period in 2012. This included a 0.2% increase in the number of loans for the construction of a new dwelling during the three months to August, with lending in this segment up 3.6% compared with the same period of 2012. The number of loans for the purchase of new homes was 0.6% higher in the three months to August.

In August 2013, the seasonally adjusted number of housing finance commitments for both new and established owner occupied housing increased by 2.3% in New South Wales, by 2.2% in Victoria and by 0.1% in Tasmania. Lending declined by 3.2% in Queensland, by 8.6% in South Australia and by 1.3% in Western Australia over the same period.