The number of loans issued for new home construction rebounded in January, confirming the moderate pace at which the housing industry is slowing.
A total of 5044 loans were issued during the month, a rise of 7.8 percent on the previous month but well below the peak of 7849 loans recorded in January 2002. The trend downwards has been evident since October 2001, signalling that the industry is slowly contracting.
The Housing Industry Association (HIA) says that while interest rates remain on hold, the outlook remains for a soft landing later this year.
Simon Tennant, HIA’s chief economist, says that the only risk to a soft landing will be the continuing spiral in land prices brought on by acute shortages and sluggish land release programs. “Traditionally the trigger for a prolonged slowdown in housing has been rising interest rates,” Tennant says. “For the coming cycle however, decreasing affordability could well have the same effect as families on median incomes are priced out of the market.
“The latest affordability measures are alarming to say the least, with families in some capital cities needing 30 percent and above of their household income to afford a median priced home.
“There is no single solution to improving housing affordability but with building costs remaining subdued, it is timely to be addressing the level of fees, charges and taxes levied on residential building which can be as high as 35 percent of the final cost of a house and land package.”
Source: Building Products News.