31/03/2010 - 15:31

Housing recovery can't be guaranteed

31/03/2010 - 15:31

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Despite Western Australia bucking the national trend, posting an eight per cent increase in residential dwelling approvals, seasonally adjusted, the nation's building industry bodies have warned a housing recovery can't be guaranteed.

Housing recovery can't be guaranteed

Despite Western Australia bucking the national trend, posting an eight per cent increase in residential dwelling approvals, seasonally adjusted, the nation's building industry bodies have warned a housing recovery can't be guaranteed.

Figures released today by the Australian Bureau of Statistics indicated Australian building approvals fell 3.3 per cent to 13,929 units in February, seasonally adjusted, from an upwardly revised 14,405 units in January.

However, residential dwelling approvals in WA increased 8.1 per cent during February as they did in Queensland (2.1 per cent) and Tasmania (17.6 per cent).

Approvals fell two per cent in Victoria, 14.6 per cent in New South Wales and 23.3 per cent in South Australia.

The Housing Industry Association said for the second month in a row the much needed housing recovery felt the impact of a 12.3 per cent drop in units and semi-detached "Other dwelling" approvals, with the "Other dwelling" segment already down 27 per cent on December 2009 figures.

Housing Industry Association chief economist, Ben Phillips said the poor start to 2010 should be a reminder that a housing recovery is not a given.

A sentiment shared by Master Builders Australia chief economist, Peter Jones who said the second consecutive fall in dwelling approvals, and another big fall in non-residential building approvals, marked the end of the big upswing in approvals caused by the (federal) government's stimulus initiatives.

"The end of the First Home Owner 'boost' is taking the wind out of the sails of the housing recovery and the spike in non-residential approvals associated with the school-building program is now over," Mr Jones said.

"The government's social housing stimulus spending is helping, but a sustained upturn in residential building will require upgraders and investors to fill the gap left by first home buyers."

Mr Phillips said interest rates will be a key factor in determining the fortunes of the home building industry considering government support, through the social housing initiative and the first home buyers boost, was being phased out or removed in 2010.

"The result indicates that the units and semi-detached market is still bearing the brunt of tight credit conditions," he said.

"Interest rate increases over 2010 will only exacerbate this situation.

"Tight credit conditions in the detached housing market are still being masked by the latent impacts of the first home buyers boost, social housing boost and low interest rates through 2009.

"Adding further pressure to a broad-based housing recovery will be the ever-present supply side issues, such as the high cost of infrastructure charging at a state and local level and an approvals process that is overly constraining and time consuming."

Mr Jones was more forthright in his recommendation to the Reserve Bank of Australia.

"Master Builders urges the Reserve Bank to take a more cautious approach on interest rates to ensure momentum is regained in residential building and prevent a collapse in non-residential building," he said.

Although Mr Phillips highlighted some positives looking forward.

"In spite of the poor start to 2010, building approvals remain 47.2 per cent higher than 12 months ago and auger well for a spirited recovery in housing starts through 2010," he said.

"HIA is forecasting a boost in housing starts of 18 per cent in 2010 compared to the disastrous year in 2009.

"It's all about what happens beyond 2010. The fundamentals of strong population and employment growth can be expected to push high housing demand. Without an adequate supply response, price pressures and further erosion of housing affordability will be inevitable."

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