New home building activity has hit a 10 year low, with one of the country’s biggest property development firms claiming we’re experiencing the ‘worst new housing market’ in more than 20 years.
According to data from the Australian Bureau of Statistics (ABS), new residential building work done fell by 3.1 per cent in the June quarter.
Detached housing, a key persistent source of weakness for the Australian economy, fell by 3.6 per cent, while work done on ‘other dwellings’ fell by two per cent.
Housing Industry Association (HIA) chief economist Harley Dale said that a fifth consecutive decline in residential building work done in the June 2012 quarter was steeper than initially thought.
“Interest rate cuts are helpful in hopefully turning around residential construction from the parlous state evident in mid-2012.
“However, the efficacy of easier monetary policy is considerably diluted by the historically high and excessive margin between the official cash rate on the one hand and mortgage and business loan rates on the other,” Mr Dale said.
Property development company Stockland said its profits may slump by a further 10 per cent this year, after the firm's net profit for 2011-12 was down 35.5 per cent from the previous year.
“We started the year with around 700 fewer contracts on hand than the previous year, reflecting the sluggish market in FY12, and so far we are not seeing any improvement,” said Stockland managing director Matthew Quinn.
Mr Quinn reminded shareholders at Stockland’s full-year results presentation that Australia was experiencing “the worst new housing market I had seen in more than 20 years in the industry
“This is not only because sales are at a cyclical low, but because this has persisted despite conditions that would normally stimulate activity – low unemployment, low interest rates, undersupply of housing and low rental vacancy rate.”
In the last week, the South Australian government acknowledged the slowdown with the extension of a new home building grant, with most other states having similar initiatives.
“The grants will help people get into a new property sooner and it will also help create additional housing stock that is needed with projected population growth in the future,” Real Estate Institute of SA (REISA) chief executive officer, Greg Troughton, said in relation to the state government's initiative.
“Although REISA is disappointed that the first homeowner grant is being reduced for people purchasing existing properties, the intent to stimulate the housing market and construction is respected.”