Drop in loans for new housing construction in Australia signals market weakness that could prevent housing industry offsetting expected decline in country's resource sector in 2013
CANBERRA, Austalian Capital Territory
November 12, 2012
(AAP Australian General News )
– Another fall in loans for new housing construction suggests lower interest rates aren't working, and it's likely to cause further worry in the building industry.
Australian Bureau of Statistics (ABS) housing finance data for September showed loans for construction tumbled by a seasonally adjusted 6.3 per cent, for the second straight monthly decline.
The contraction revealed on Monday was also the largest monthly decline in almost two years and would leave residential builders feeling "very nervous", Master Builders Australia said.
"The housing sector will be struggling for some time to come," chief executive Wilhelm Harnisch said in a statement.
"It puts at risk the Reserve Bank's assumption that the housing industry will offset the decline in the resources sector in 2013."
The Reserve Bank of Australia (RBA) has cut the cash rate by 150 basis points since November last year, and although Monday's data did not capture the impact of a 25 basis point cut in October the building sector continues to struggle.
The RBA unexpectedly left the rate unchanged at last week's monthly board meeting, when many economists had expected another reduction, and financial markets now see the next cut as more likely in February next year.
However, it was not all gloom, with the ABS data also showing owner-occupier home loans grew for a second month in a row in September, posting the largest monthly number since December 2011.
These loans grew by 0.9 per cent in September, compared to the previous month, to 46,395 mortgages.
Of these, 19.3 per cent were granted to first home buyers, the largest proportion since January this year.
Mortgage provider Loan Market noted there had been strong lending results in the first three months of the 2012/13 financial year for Western Australia and Queensland, and the two territories.
WA was up by 14.6 per cent in the September quarter from a year earlier and Queensland rose by seven per cent, while the Northern Territory surged by 17.1 per cent and the ACT was up by 6.5 per cent.
But Macquarie Research senior economist Brian Redican said the overall pace of recovery was lacklustre when compared to previous housing cycles.
"The details do not yet tell a compelling story that the housing sector is poised to take the baton from the mining construction sector and drive overall growth," Mr Redican said in a note to clients.
However, a report released by Deloitte Access Economics showed that despite a difficult global environment, including a downturn in commodity prices and concerns over Chinese growth, the value of investment projects still managed to grow by over $6 billion during the September quarter.
This was 0.7 per cent higher than the previous three months and took the total value of investment at all stages of development to $926,713 billion.
Over 50 per cent of projects were planned in Western Australia and Queensland.
TD Securities strategist Alvin Pontoh said the report provided reason not to be overly bearish on the outlook for the economy.
"Investment activity still looks robust for the next year or so," he said.
(c) 2012 Australian Associated Press