While investors are hog wild speculating in pre-existing homes, mortgage demand for new housing has stalled, falling by 0.4% in December and basically flatlining since March 2013 (see below charts).
However, the news is better when measured on a rolling annual basis, with the number of finance commitments for new homes and construction rising by 14% over the year (see next chart).
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 by New South Wales and Western Australia, although Queensland and South Australia are in an uptrend as well (see next chart).
The recent stalling of new home finance is disappointing given the RBA’s plan for housing to fill the void as the mining boom unwinds. That said, the RBA were always fighting an uphill battle on this front given that mining investment (represented below by engineering construction) is roughly 2.5 times the size of residential building (see next chart).
With land prices remaining stubbornly high, and state planning systems, taxation, and infrastructure provision remaining unfavourable towards new development, there are obviously also major structural barriers working against any construction uplift.
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