The Housing Industry Association is calling for greater new home building stimulus, after a new report found housing starts are set to plummet in 2012.
According to the HIA's summer quarterly national outlook, residential land sales have bottomed at a woefully low level, as have new home sales volumes, while local government building approvals experienced accelerated weakness which took them back toward GFC levels.
New housing finance had, encouragingly, tracked sideways for some months, but remained 2.5 per cent down on the equivalent levels in 2010.
Over the three months to October 2011, total seasonally adjusted building approvals implied an annual level of housing starts (using the long term conversion ratio of 0.961) of around 138,000 – 700 fewer starts than in the GFC-affected calendar year 2009.
While the Reserve Bank has cut rates twice in the last three months, HIA's chief economist Harley Dale said more action is required to help fix Australia's housing supply/demand issue.
"Some recent interest rate relief is helpful and commendable. The RBA will rapidly act more aggressively if they deem it necessary," he said.
"That said, one would hope the Federal Government stands ready to act quickly to stimulate activity in a complementary role to the RBA. The case for this already happening on the new housing front is compelling and has been for a considerable time.
"What should be happening now is direct, short term stimulus to new home building within an over-arching, renewed focus on structural reform to reduce the disproportionately high, inefficient and inequitable cost base of new homes throughout Australia. Housing is shelter, it is a necessity of life. Australia doesn't provide enough of it, in an affordable fashion, for renters or owners.
"So, kill three birds with one stone. Stimulate the new home sector to ensure the short term provision of a larger amount of a necessity good. Create a positive multiplier impact to the wider domestic economy during a time of fragility and uncertainty. Engender a medium/long term level of new home building more commensurate with the requirements of Australia's population which will create efficiency gains and inter-generational equity improvements in the Australian economy."