ShareHome building slide worsens By online business reporter Michael Janda
Updated 36 minutes ago
The Housing Industry Association says yesterday's rate rise will only make the housing shortage worse (ABC News: Michael Janda) Home building approvals have fallen for the sixth month in a row, with a 6.6 per cent slump in September.
Total dwelling approvals are now at their lowest level since June 2009, according to the Bureau of Statistics seasonally adjusted figures.
The biggest fall this month was in the more volatile 'other dwellings' category that includes large apartment developments that can skew the figures month to month - it was down 15.7 per cent.
However, the more stable private sector houses segment also slipped 2.2 per cent - it is the fourth month in a row this category has fallen.
The annualised pace of new dwelling construction dropped to 146,000 homes in September, well below the 200,000 homes many economists believe are needed annually to keep up with demand from a growing population.
TD Securities senior strategist Annette Beacher says the fall is a natural outcome of stimulus being withdrawn.
"The housing recovery in 2009/10 was entirely due to both monetary and fiscal policy being squarely aimed at this sector during the worst of the global financial crisis," she wrote in a note to clients.
"Official cash rates were slashed from 7.25 per cent to 3 per cent and the first home owner's grant was ramped up to $21,000, with a final expiry date of December 2009."
However, Annette Beacher says the fall in building approvals may have a side benefit for property investors worrying about the value of their properties falling.
"Potentially, this shrinking of housing construction could be seen as cushioning house prices, as the supply side of the housing equation is again likely to prove to be insufficient to match demand," she added.
Reserve Bank 'gets it wrong'
The Housing Industry Association's senior economist Andrew Harvey says the figures show the Reserve Bank's rate rise yesterday was untimely.
"The weak housing outlook is compounded by yesterday's interest rate hike by the Reserve Bank which, due to the additional independent 20 basis point increase by the Commonwealth Bank, will act like a sledgehammer on confidence and economic activity in the non-resource sectors," he said in a statement.
"This total 45 basis point increase in home-lending rates will seriously dent new home demand and confidence, and is worrying as it follows the removal of the First Home Owners Boost and the impact of previous rate hikes.
"Indeed, it appears that we have a near perfect storm of poor conditions for the house-building market at the very time a sustainable boost to Australia's housing supply is needed to allow a balanced economic recovery."
CommSec's chief economist Craig James has also slammed the central bank's decision to raise rates in November.
"Did the Reserve Bank get it wrong by lifting rates yesterday - it certainly looks like it," he wrote in a note on the figures.
"Not only are approvals below longer-term averages but the drop in approvals over the past five months is the biggest in a decade.
"Builders were already worrying where their next jobs were going to come from and clearly those risks have intensified after the latest lift in official interest rates."
CommSec says the downturn is not confined to residential property, with commercial construction approvals at five year lows.
