A distinct correlation is emerging between the decline of new home construction approvals and the tightening of finance in top markets with property price drops, analysis reveals.
The combination of housing finance becoming increasingly difficult to access and price falls in Sydney and Melbourne is causing a continued slowdown in new home approvals, according to Diwa Hopkins of the Housing Industry Association.
Data from the ABS revealed there was a decline of 1.5 per cent in new home approvals across Australia, translating to a seasonally adjusted 17,070 homes.
This is a drop of 13.2 per cent compared to this time last year.
The biggest dwelling approval drop was felt in South Australia, with a seasonally adjusted decline of 17 per cent. Following this was Tasmania, down 3 per cent; Victoria off by 2.6 per cent; Queensland down 1.1 per cent; NSW easing by 0.5 per cent; and Western Australia edging lower by 0.1 per cent.
In trend terms – the only type of analysis for which data is available for the territories – total dwelling approvals for October slumped in the Northern Territory by 12.5 per cent, but rose by 0.8 per cent in the ACT.
The property type experiencing the largest declined was Multi-unit homes was the hardest hit, with a drop of 5.4 per cent. Meanwhile, detached house approvals actually rose by 1.7 per cent.
“While APRA’s restrictions were designed to curb high-risk lending practices, ordinary home buyers are now also experiencing delays and constraints in accessing finance,” Ms Hopkins said.
“A credit squeeze has emerged in the latter of half 2018 and this is playing a major role in slowing the flow of new home building work entering the pipeline.
“Households who are seeking to buy new homes are often not receiving sufficient finance, while for those who do receive adequate financing, it now takes much longer to reach that milestone.”
Ms Hopkins added that a new home construction downturn had been expected for a long time.
“The current credit squeeze, however, risks the pace and magnitude of the decline developing into something faster and greater than expected,” she said.
“This would result in a greater drag on the wider economy,” concluded Ms Hopkins.