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$vuetify.icons.faPhone1300 650 620

New home building slows as affordability deteriorates

Media release

New home building slows as affordability deteriorates

Media release
“The number of loans issued for the purchase or construction of new homes declined by 9.7 per cent in July 2023, to its lowest level in 15 years,” stated HIA Senior Economist Tom Devitt.

The ABS released the Lending to Households and Businesses data for July 2023 today. The data provides statistics on housing finance commitments.

“This is the weakest monthly performance since the Global Financial Crisis and leaves the three months to July 31.7 per cent below the same quarter last year,” added Mr Devitt.

“The previous year of interest rate increases from the RBA has compounded the surge in construction costs during the pandemic, drying up the pipeline of new homes awaiting construction around Australia.

“This has all but guaranteed a decade low trough in detached house commencements for the coming year.

“A recovery from late next year should be supported by strong market fundamentals, including record population growth, acute shortages of rental accommodation, and a strong labour market.

“The recovery will, unfortunately, be limited by the deterioration in housing affordability which will only exacerbate the housing crisis across Australia.

“The HIA Affordability Report for the June Quarter 2023, also released today, highlights the alarming speed at which affordability deteriorated in just one quarter, with the Affordability Index falling by 8.7 per cent nationally.

“Purchasing a home is the least affordable it has been since just before the GFC, 15 years ago.

“Soaring mortgage rates and recovering dwelling prices mean that the average Australian income earner would now have to commit half of their income to the service of a typical new mortgage. In Sydney, they would have to commit more than two-thirds of their income.

“This deterioration in affordability will act as a handbrake on any recovery in home building. 

“If the ambitious target of building 1.2 million new homes in five years is to be achieved, policymakers need to act quickly.

“Changes to planning, regulatory and tax systems are needed to bring down construction and finance costs and facilitate greater investment in housing near jobs and transport,” concluded Mr Devitt.

In original terms, the total number of loans for the purchase of construction of new homes in the three months to July 2023 declined in all jurisdictions compared to the same quarterly period a year earlier, led by the Australian Capital Territory (-61.1 per cent), and followed by the Northern Territory (-53.4 per cent), South Australia (-37.3 per cent), New South Wales (-32.8 per cent), Tasmania (-32.6 per cent), Victoria (-29.7 per cent), Queensland (-26.0 per cent) and Western Australia (-24.1 per cent).

Lending for purchase and construction of a new home

Source: ABS

For more information please contact:

Thomas Devitt

HIA Senior Economist

Geordan Murray

Executive Director – Future Workforce
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