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Housing market remains in limbo
Jul 08, 2009 7:15am

The housing market is still in limbo as more data shows conditions will get tougher before it can reach a sustainable turnaround.

The housing market is still in limbo, with new data suggesting conditions will become tougher before a sustainable turnaround can be reached.

And conditions are unlikely to improve when first home buyers' grants, which are providing a base for home sales, are reduced by the end of the year.

Dr Andrew Wilson, senior economist at Rider Levett Bucknall, said that by the end of June the value of non-residential construction, including apartments, was as much as $16 billion below last year's $60 billion.

Dr Wilson said that while the signs of a rise would be reflected in the planning of real estate projects by the end of the year, there had been a sense the stimulus packages and first home buyers' grants had acted as circuit-breakers that had caused a hiatus in the residential and non-residential markets.

"There seems to be no sign of a revival," Dr Wilson said.

Figures released yesterday showed the national construction industry registered a further, and accelerated, decline last month when the seasonally adjusted Australian Industry Group/Housing Industry Association performance construction index fell by 4.3 points to 42.6, to remain below the critical 50 points no-change level for a 16th consecutive month.

House building activity fell for a 17th consecutive month in June, with the sub-index registering 44, 1.3 points lower than in the previous month.

The seasonally adjusted index records national activity such as orders/new business, deliveries and employment in the housing industry.

Housing Industry Association senior economist Ben Phillips said the June index, like the recent building approvals and new home sales data releases, suggested the impact of the first home owner grant was levelling. Prospects for growth for the rest of the year depend on the now-weak investor and trade-up buyer markets.

Last week, government figures showed, new home sales fell by 5.7 per cent in May, after rising by 1.2 per cent in April. Detached house sales fell by 9.9 per cent in NSW.

Australian Industry Group associate director of economics and research Tony Pensabene said the June index indicated building continued to decline, albeit at a slower pace.

"The result also reflects the recent up-and-down nature of the index and, consistent with the rest of the economy, it is demonstrating the trend of getting worse more slowly," Mr Pensabene said.