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New housing finance softening a result of tightened stock

By Sasha Karen 17 January 2019 | 1 minute read

Analysis of new ABS data has found housing finance commitments for new properties continued its downward trend over the month of November, which an expert claims is representative “of a market continuing to ease back from record highs”.

House construction

Loans by banks for new property construction were on the decline, dropping by 2 per cent over November, ABS data has shown.

For Tim Reardon, principal economist at the Housing Industry Association, this reveals the continuing slowdown that he expects will continue through the year.

“Housing finance figures are one of the leading indicators of activity in the housing market and shows the level of building activity likely to take place in the second half of 2019,” Mr Reardon said.

“The fall in lending in November is consistent with the decline over the course of 2018 and tells us that the volume of work builders have in their pipeline is continuing to fall.”


While the slowdown has been expected, the current conditions could cause the slowdown to occur sooner and be felt more strongly than thought, should the market tighten further, he said.

Mr Reardon attributed the decline in lending to the ongoing credit squeeze the banks have placed on lenders.

“The credit squeeze started in 2017 when APRA imposed a range of restrictions on the market. It is now occurring at the behest of the banks, which have tightened lending above and beyond APRA’s requirements,” Mr Reardon said.

“HIA research has found the time taken to gain approval for a loan to build a new home has blown out from around two weeks to more than two months.

“Policy makers and lenders alike need to be cognisant that ordinary home buyers are now facing excessive loan processing times and also much greater rates of loan rejection. Today’s results show how this is weighing substantially on the new home building sector.”

He concluded: “We’ve long been anticipating the current downturn in new home building, but there is a risk it could develop more quickly and strongly than expected if additional restrictions are imposed on the market.”



- duplicate, see Discount Points

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New housing finance softening a result of tightened stock
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