The situation continues to go from bad to worse for Australia’s home builders.
Last week, we reported that the number of housing construction firms placed into insolvency in Australia has reached a nine-year high, heralding an “insolvency Armageddon” for the nation’s home builders.
So far this financial year, 1672 home building firms have collapsed, the highest number since 2014:
Moreover, with two months to go in this financial year, the number of insolvencies is certain to exceed the 2014 number.
Further bad news arrived on Friday when the Australian Bureau of Statistics (ABS) released data on loans for the purchase and construction of new homes.
As shown in the next chart from the Housing Industry Association (HIA), the number of loans issued to purchase or construct a new home was down 31% year-on-year and is tracking at its lowest level in 15 years:
“The last time so few loans were issued for the purchase or construction of a new home was in November 2008, when the GFC caused a contraction in building”, HIA Chief Economist Tim Reardon noted.
“This data confirms that ongoing and significant declines in new home sales will see new home commencements slow significantly in the second half of 2023, under the weight of the higher cash rate”.
Reardon also warned that these weak figures won’t hit the economy until next year once the pipeline of homes currently under construction has been exhausted.
“There are very long lags in this cycle and the full impact of the RBA’s rate increases are still to fully hit the housing market, let alone the broader economy”, Reardon said.
The housing construction slowdown has struck at the worst possible time, given home demand is skyrocketing as a result of Labor’s record net overseas migration.
As demand continues to outstrip the industry’s ability to produce new houses, Australia’s rental crisis and homelessness will inevitably worsen.
We are witnessing the beginnings of an unmitigated housing disaster.
