Yesterday’s housing finance data for July, released by the Australian Bureau of Statistics (ABS), continued to point to an ongoing improvement in the new home market, with the total number of finance commitments for construction and new dwellings increasing by a seasonally adjusted 0.7% over July, 15.5% over the year and were tracking 13% above the 5 year moving average (see below charts):
Looking at at the state-by-state breakdown, which is presented below on a rolling annual basis since it is not seasonally adjusted, shows that the recovery in new home finance continues to be driven primarily by New South Wales and Western Australia, although all mainland states except for Victoria are in an uptrend (see next chart).
The outlook is good for a continued improvement. Not only are nominal mortgage rates near the lowest level on record but, more importantly, all jurisdictions (except the Northern Territory) are in the process of shifting first home buyers (FHBs) grants towards newly constructed dwellings, which should shift FHB demand towards new construction in the months ahead.
However, with land prices remaining stubbornly high, and state planning systems, taxation, and infrastructure provision remaining unfavourable towards new development, the overall improvement in new home construction is unlikely to be anywhere near enough to pick-up the slack left as the mining boom unwinds.
As argued repeatedly, a genuine and sustainable construction boom requires reforms to the supply-side, not demand-side stimulus.
