Rate hikes hit lending for new home purchases and builds

04 November 2022

Lending for the purchase or construction of a new home fell 9.3% in the month of September, to its lowest level since April 2019 - that’s according to the HIA’s senior economist Nick Ward.

The ABS recently released the Lending to Households and Businesses data for September 2022. The data provides sobering statistics on housing finance commitments.

“The total value of housing loans also fell by a further 8.2% in September, to be 18.5% lower than at the same time in the previous year,” says Nick.

He adds that the RBA’s tightening is weighing heavily on demand for housing and the full impact will not emerge until the second half of 2023.  

“This slowing in housing finance data is consistent with other leading indications, such as HIA’s New Home Sales Survey, which have fallen more than 15% in the September quarter. If these trends are sustained, which is expected, then the 2.75% increase in the cash rate so far will have brought this boom to an end.”

At present, there is still a huge volume of work under construction that is sustaining employment across the economy, helping to keep the unemployment rate at exceptionally low levels.

“When this pool of work is completed, the full impact of this rate rising cycle on employment will emerge. There is a risk that this volume of work on the ground is obscuring the adverse impact of rising interest rates.”

Nick adds: “These treacherous lags that characterise this housing cycle could result in the RBA weighing too heavily on households and businesses and jeopardising the housing industry’s future soft landing. Patience is required to see the full effect of rate increases to date.”

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