CANBERRA, AAP – New construction figures show home building remains at a cracking pace, although the sector could face challenges with elevated demand putting pressure on the supply of tradies and materials.
Housing Industry Association economist Tom Devitt expects such challenges will persist until the housing market slows towards the end of the year.
The Australian Industry Group/HIA performance of construction index eased 0.8 points, but at 58.3 per cent in May it still indicates the industry is comfortably in expansionary territory.
Within that, house building stands at an index of 62.8.
“The volume of work on the ground continued to increase in May,” Mr Devitt said.
“The extension of the HomeBuilder commencement deadlines will see new house building levels remaining elevated for longer.”
The federal government’s HomeBuilder grants program officially ended in March, but it has since extended the deadline to begin construction by an additional 12 months.
Addressing senators on Wednesday evening, Reserve Bank deputy governor Guy Debelle said the increased supply in housing can help to restrain house prices.
Building approvals for detached housing struck another record in April.
“There is going to be strong growth over the rest of the year,” Dr Debelle said.
“More supply does constrain the rise in prices.”
Meanwhile, the central bank and other regulators continue to monitor developments in Australia’s booming housing market, but at this stage they are comfortable that lending standards have not dropped.
House prices rose further in May and now stand over 10 per cent higher nationally than a year earlier.
“We pay attention to the rise in house prices, definitely, but it is more the growth in lending,” Dr Debelle said.
RBA assistant governor Michelle Bullock told the hearing the central bank is working closely with the banking regulator, the Australian Prudential Regulation Authority, in monitoring the housing market.
“At the moment, our view is that the lending standards are not being relaxed,” she said.
“Because interest rates are low it is easier for people to service their loans.”
The hearing was told the increase in housing lending is mainly for owner occupiers, and largely first home buyers, but loans to investors have started to pick up from a very low level.
Separately, APRA chairman Wayne Byres told the hearing the last time the regulator intervened in the market, investor interest-only loans were running at 40 per cent of all loans being granted, but that was quickly halved.
But he said there is no intention of intervening at the moment.
“There is little value on us stomping on first home buyers trying to get into the market,” he told senators.
Asked if there is a threshold where APRA would intervene, Mr Byres said no because you have to look at the context of the environment at the time.
“I have always resisted having a simple rule because I think it sets you up to make bad choices,” he said.