“Lending for the purchase and construction of a new home has fallen to its lowest level since 2012, even before the full impact of last year’s cash rate rises take hold,” said Tim Reardon, chief economist for the Housing Industry Association.
The Australian Bureau of Statistics’ latest Lending to Households and Businesses data showed that just 4,797 loans were issued for new housing in December – the lowest level since November 2012, while lending for new homes dropped by 62.4% since its peak in January 2021.
“It is concerning that this downturn to date doesn’t reflect the full impact of the RBA’s rate hiking cycle of 2022,” Reardon said. “There are significant lags between a change in the cash rate and its impact on the economy. The economy needs time to digest the full impact of interest rate hikes before the RBA considers further action.
“We are already seeing signs of a very significant slowdown in a leading part of the economy. Industry needs stability, and the RBA won’t achieve this by sending the housing sector through boom-and-bust cycles. We don’t want to see a housing downturn gain momentum. Official data on the impact of interest rates is very lagged and appears that it is much easier to strangle the economy than it is to kickstart it.”
Reardon said that unlike in the 1980s, there is no need to crash the economy in order to save it.
“It took a decade to recover from the rate hiking cycles in the 80s, and this is a very different cycle,” Reardon said. “The supply chain disruptions of the pandemic are easing. Inflation in other economies is slowing and interest rates are not the only tool at governments’ disposal to address the inflationary problem.”
The new ABS data showed that the number of loans for the construction or purchase of new homes fell in all jurisdictions in 2022 compared to 2021. The declines were led by Tasmania, which was down by -44%, followed by WA (-43.2%), South Australia (-41.6%), Queensland (-38.1%), the NT (-34.5%), NSW (-31.4%), Victoria (-30.5%), and the ACT (-7.6%).
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