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Building approval data released this week shows that the slowdown in building activity accelerated at the end of 2018, according to the HIA.
Principal economist at the HIA, Tim Reardon, said the latest ABS data shows that a total of 13,995 homes were approved for construction in the month of December 2018.
He said this is a 23.7 per cent decline in approvals for the three months to December 2018.
Mr Reardon added that this was led by a 40.1 per cent fall in approvals for apartments for the quarter. He said houses fell by just 7.8 per cent, bringing approvals back to 2013 levels.
“The boom in approvals of apartments is now over,” said Mr Reardon.
“Apartment approvals averaged almost 30,000 per quarter for the three years of 2015–17, in stark contrast to the 17,778 record for this December quarter.”
He said there are a number of reasons for this.
“This weak result is the consequence of a range of measures including punitive rates of tax on foreign investors, record supply of apartments, falling house prices and the credit squeeze.
“The credit squeeze that is impacting the market at the moment has accelerated the slowdown in approvals.
“HIA research has found that the time taken to gain approval for a loan to build a new home has blown out from around two weeks to more than two months.
Mr Reardon suggested that things could be done more efficiently.
“Policymakers and lenders alike need to be cognisant that ordinary home buyers are now facing blowouts in loan processing times and also much greater rates of flat-out loan rejection.
“The slowdown in approvals will flow through to a slowdown in building activity on the ground later this year.
“We’ve long-been anticipating the current downturn in new home building, but there is a risk it could develop more quickly and strongly than expected.
He said that, in particular, policymakers and lenders will need to respond “judiciously” to the release of the banking royal commission’s recommendations.
The HIA said that dwelling approvals in December 2018 fell in Tasmania (-24.3 per cent), NSW (-8.6 per cent), Victoria (-8.1 per cent) and Queensland (-5.8 per cent).
It reported that increases were recorded in South Australia (+5.6 per cent) and Western Australia (+1.1 per cent).
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