Australian housing remains in the doldrums, with construction activity continuing to contract and mortgage lending still well down on a year ago, as the sector pins its hopes on a flow-on benefit from the RBA rate cut.
Construction rates across Australia had their sharpest falls in six years in May as the building of houses and apartments slowed and jobs in the sector continued to trail off, according to a survey of businesses in the industry.
The Australian Industry Group/Housing Industry Association Performance of Construction Index (PCI) report released on Friday said overall activity slipped 2.2 points on the previous month to 40.4 – an accelerated decline below the 50-point mark separating expansion and contraction.
The PCI recorded a 14th month of shrinking apartment building activity and house building activity contracted for the 10th month in a row.
The pace of houses being built was at its weakest level since September 2012 and the report suggested there was no recovery in sight, given that new orders in May fell at their steepest rates in six and a half years.
“This indicates a continuation of broad weakness in demand and points to ongoing subdued house building activity in coming months,” the PCI report said.
The report noted dwindling demand for residential building construction was affecting job prospects in the sector, with employment shrinking for the 10th consecutive month.
“It indicates that construction businesses are responding to the ongoing weakness of overall demand conditions by exerting greater caution in terms of their labour recruitment,” it said.
Analysts from AiG and the HIA said the construction industry may yet benefit from the federal election and Tuesday’s interest rate cut by the Reserve Bank of Australia, but there was no positive news in the data so far.
“The industry and businesses in its supply chains will be hoping that lower official interest rates will flow through to borrowers and help turn around the recent negative trends,” Ai Group head of policy, Peter Burn, said.
“With major banks set to pass on most of the RBA’s rate cut to borrowers, it will be interesting to note whether any post-election glee translates to a lift in new orders in June,” HIA economist Tom Devitt said.
Respondents to the PCI survey in the residential building sector pointed to a drop in demand, tight lending conditions and falling property prices.
Meanwhile, figures released on Friday by the Australian Bureau of Statistics show fewer owner-occupier mortgages were issued than expected in April but the total value of new home loans lifted slightly during the month.
The value of total mortgage lending – excluding refinancing – rose by 0.2% in April to $17 billion, according to seasonally adjusted figures.
The number of new loans granted to owner-occupiers for April fell by 1.1%, missing predictions of a flat result, but the value of owner-occupier loans outstripped expectations with a 1.0% jump to $12.6 bn.
The value of new investor loans underwhelmed with a 2.2% drop to $4.4 bn, missing consensus expectations of a 1% value rise.
The value of both owner occupier and investor loans remains well down on a year ago.
Nonetheless, total lending to households and businesses was up by 6.1% for the month to $67 bn, still 2.7% down on a year ago.
Business lending in April surged by 11.3% to $36 bn and lending for personal finance lifted 4.3% to $4.8 bn.
The value of loans for refinancing dropped by 0.8% to $8.9 bn.