Financing for the construction of new dwellings rose by 2.4% in May, making it four consecutive months of growth, according to Master Builders Australia. Moreover, total housing finance grew by 1.3% in seasonally adjusted terms over the same period.
“As a [leading indicator] of future residential building activity, the latest data supports Master Builders’ positive short term outlook for housing construction,” said Matthew Pollock, Master Builders Australia’s national manager for economics and industry. “Restrictions by the regulators to curb investor activity have begun to bite, with investor’s share of new housing commitments falling by 1.4 per cent in May and adding to the fall of 2.3 per cent recorded in April.”
As was intended by the Australian Prudential Regulation Authority (APRA), the restrictions on investors have made more room for first-home buyers to manoeuvre in the market. “The number of first-home buyer commitments jumped by the biggest margin in more than 12 months, recording 8,439 new [commitments] in May, the highest number of first-home buyer commitments since October 2014, moving back above a 14 per cent share of total commitments for the first time since July 2015,” Pollock said.
Looking further out, though, with net migration of more than 200,000 people locked in to the budget forward estimates, there is a risk that new housing supply will once again fall short of demand if housing finance commitments enter a softer period.
“To keep pace with population growth we will need to build more than 180,000 new [homes] per year for at least the next five years,” Pollock said. “To fill the housing shortage which currently sits at more than 100,000 homes, and to ensure that shortages in the stock do not put upward pressure on house prices, we will need to build even more new homes.”
If managed well, the housing boom could continue for a few more years and would offer a much needed source of economic and jobs growth. “[However] regulatory reforms are urgently needed to support a more efficient supply of new housing construction going forward,” he added.
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