The Housing Industry Association (HIA) quotes figures from the Australian Bureau of Statistics to reveal that new home lending increased during the March quarter this year, alongside a further strengthening in dwelling prices. The HIA is the voice of Australia’s residential building industry.

HIA Economist, Diwa Hopkins explains that the value of lending to both owner occupiers and investors purchasing or constructing new homes increased during the March 2014 quarter; owner occupier lending was up by 3.6 per cent, while investor lending increased by 4.9 per cent.

The latest data also shows that capital city residential property prices increased by 1.7 per cent during the first quarter of 2014, to be 10.9 per cent higher than a year ago.

According to Ms Hopkins, following a period of fairly strong increases late last year, prices appear to be growing within a more sustainable range. Combined with the current low interest rate environment, these developments provide favourable conditions for the residential construction sector.

She adds that sustained strength in new home building will be of increasing importance. Though Australia has seen a reasonably strong population growth in recent years, the supply response has lagged and must catch up to meet that additional demand for housing.

Ms Hopkins concludes that residential construction is a key area of growth, which also has considerable links with the rest of the economy. A sustained recovery in residential construction will therefore, be a crucial ingredient to a broader economic recovery.