Australia’s new housing pipeline unexpectedly grew in August as new dwelling approvals increased for the first time in five months, shrugging off a HomeBuilder hangover in detached houses and as attached home approvals picked up at the fastest rate since March.
The monthly 6.8 per cent increase lifted total new approvals to a seasonally adjusted 18,716 homes. It followed July’s 8.6 per cent decline and defied economists’ expectations for a further 4 per cent contraction following the end of the federal government’s HomeBuilder incentive payments.
Monthly figures can be volatile, but even in the longer term, the new housing pipeline appears to be strengthening.
“Approvals for detached housing remain strong despite the unwinding of stimulus measures in April and the ongoing lockdowns in NSW and Victoria,” said Daniel Ross, the Australian Bureau of Statistics’ director for construction statistics.
“Driven by record-low interest rates, increased household savings and confidence in the housing market, private house approvals are 23.8 per cent higher year-on-year and 42 per cent higher than August 2019.”
But the big risk for the industry – if inbound immigration does not resume – is that the pipeline runs out of steam.
“Next year risks seeing weaker home building reflecting the pull forward of activity due to HomeBuilder and reduced demographic demand after two years of zero immigration,” AMP Capital chief economist Shane Oliver said.
The booming established housing market is lifting prices and boosting sentiment. CoreLogic’s daily home value index – to be published on Friday – is on track to show Sydney dwelling values gained 1.9 per cent in September alone and Melbourne homes up a more modest 0.8 per cent.
Housing credit is still rising. Separate Reserve Bank of Australia figures out on Thursday showed the stock of loans to owner-occupiers rose 0.81 per cent in August from July – faster than the monthly average 0.77 per cent rate of the past two decades.
Lending to investors grew more modestly, up 0.23 per cent to $669.7 billion, well below the average 0.75 per cent so far this century.
But policymakers, concerned the market is overheating, are formulating macro prudential policies to curb the tide of capital washing into housing, and while these will play a role in the much-needed market cooling and improve affordability, tighter lending policies could also pose a risk to the ongoing development of new housing.
Developer Stockland, which last year sold 7700 new homes to first home buyers, upgraders and investors, this week warned against any new credit rules that could reduce supply of new dwellings.
The latest ANZ/Property Council quarterly survey shows industry players expect a tightening in credit conditions over the next 12 months.
While the number of new dwelling approvals is rising, the industry is already battling capacity constraints to build them. This has likely been further hampered by construction industry slowdowns and closures in NSW and Victoria.
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