Builders lament lack of financial stimulus

An increase in the first home owner grant and further cuts to interest rates are required to stimulate a moribund building industry, Master Builders Australia has claimed.

The call comes after a survey by the building and construction industry association revealed conditions deteriorated in the December quarter, with builders reporting a decrease in sales, profitability, and activity.

The survey, which was based on more than 400 builders and contractors, also found that respondents blamed a credit crunch for part of their woes, with 40 per cent of them concerned the availability of finance was having a major effect on their business.

Peter Jones, chief economist for Master Builders Australia, said the survey results support calls for short-term stimulus measures in conjunction with further interest rate cuts to help boost the industry.

“Interest rate cuts over the past year appear to have failed to boost the confidence of new homebuyers,” he said.

Real Estate Institute of Queensland (REIQ) research analyst, Ryan Connors, said in a blog that the introduction of the $15,000 First Home Owner Construction Grant (FHOCG) in October - at the expense of the $7,000 First Home Owners Grant - was yet to deliver a rise in new building starts.

"The REIQ were initially wary of the FHOCG and while there were never going to be any immediate results, there doesn’t appear to be any positive shift in the proportion of new dwellings to overall dwellings financed as yet (at about 14 per cent for November)," he said.

"The next six months is going to be a real test of how the overall effectiveness of this policy change has been. Briefly looking at dwelling construction, 6,676 Queensland dwellings were commenced in the September quarter 2012, down 12 per cent from a well-performing June quarter."

Overall first home buyer numbers were lower in Qld, according to Australian Bureau of Statistics (ABS) numbers, down 33 per cent on-month in November. NSW also recorded falls.

Mr Jones said while the Reserve Bank was keen to see the building industry boost the non-mining sectors of the economy, "this does not look likely unless macroeconomic policy becomes more accommodating".

“The government can no longer simply leave all the heavy lifting to the Reserve Bank. A short-term increase in the first home owner’s grant for new houses and bringing forward of civil works, combined with rate cuts will go a long way towards restoring confidence,” Mr Jones said.

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