It’s no wonder that a survey out yesterday showed that the home building sector expanded for the first time in more than a year in September, thanks to the growth in demand from first home construction buyers.
It was in fact the best performance since February 2008, according to the Performance in Construction Index.
And it is clear from the backlog of approvals and home loans signed that there is more than enough demand for new homes in the system to enable home builders to power through the impact of the rate rise on Tuesday, and those to come from the Reserve Bank.
The survey, from the Australian Industry Group and Housing Industry Association, showed the index rose 8.4 points from August to 50.8 in September. A reading above 50 shows the industry is expanding.
The industry is now seeing expansion because of the impact of the higher demand for newly built homes from first home buyers who have been attracted by the higher grants from the federal and state governments.
It has also seen a boost to demand for existing new homes, so the home building industry is benefiting doubly from the stimulus.
The first home buyers grants were lifted in October-November of last year and took a couple of months to get going as the building approvals and the loan applications moved through the system, and then builders and developers had to scale up to meet the increased business levels.
The first home buyers’ grants dropped from the first of this month as the stimulus package was cutback (as planned).
But the accumulated demand from first home buyer builders has now hit critical mass and is driving the expansion of the industry.
It’s more than making up for the continued depressed level of construction of new apartments, townhouses and flats from developers.
The underlying strong level of demand from new home buyers was seen in the Australian Bureau of Statistics figures for August.
Broadly they showed that, in seasonally adjusted terms, the total value of dwelling finance commitments (excluding alterations and additions) rose 0.7% in August to $22.78 billion.
There was an increase recorded in investment housing commitments, up 7.6%, but the value of owner-occupied housing commitments fell 1.7%.
The figures confirm that housing finance for new home building was solid in August, with the number approved rising 4.6% in August, seasonally adjusted.
The number of new dwelling construction loans approved jumped to 6,614, worth $1.623 billion.
Both were the highest since the first home buyers’ scheme changes were introduced late last year.
They were higher in August because the grants for new home buyer builders were to fall from October 1 and August was the last month when it was considered safe to obtain finance and sign contracts on a new home project.
Since last October, the number of home loans approved for new home construction has jumped by more than 66%, from 3,972 in October to 6.614 in August.
The value surged by a similar figure: a touch over $66%, from $999 million in October to $1.625 billion.
In all, over 60,000 loans for new homes have been approved worth well over $16 billion.
And demand for existing new homes was a touch stronger again; the number of loans was up 4.9% in August over July. It had been up just 1% in July.
The number of new loans approved for the purchase of an existing new home hit new highs of 2,760 and their value rose to $785 million respectively.
The number of loans approved for the purchase of existing new homes rose by nearly 50% to 2,760 in August. The value jumped by close to 40% to $785 million as well.
The rising level of demand for existing new homes means any unsold houses are being sold more quickly, helping developers and the remaining small spec builders expand construction.
Yesterday’s figures from the ABS showed the number of loans for the purchase of existing homes (including refinancing) fell 1.5% in August (seasonally adjusted) after a small fall in July.
The number of loans approved for the purchase of existing houses fell to 53, 3445, worth $14.135 billion. Both were lowest since March of this year, showing that there was a distinct cooling in demand.
As a result there was a fall of 0.6% in the number of finance commitments for owner-occupied housing (including refinancings) in August, seasonally adjusted, to 62,718.
That however was a bit misleading, as overall the number of refinancings fell 5.6% (seasonally adjusted) in August as buyers opted to trade up to new houses instead of refinancing at these low interest rates and then perhaps renovating.
Excluding refinancings, the number of owner-occupied dwellings financed rose 1.3% in August, seasonally adjusted.
The number of bank loans fell 0.5% in August and the number of loans approved by non-bank lenders continued falling, down 7.4%.
The ABS said that in original terms, first home buyer commitments as a percentage of total owner occupied housing finance commitments fell from 25.3% in July 2009 to 24.7% in August.
And the prospect of rising interest rates didn’t worry people in August with the number of fixed rate loan commitments as a percentage of total owner-occupied housing finance commitments dropping from 7.2% in July 2009 to 6.3% in August.
The seasonally adjusted estimates decreased in most states and territories with the exception of Australian Capital Territor
