New build data shows further 'divergence' between houses and units

The number of new homes being built rose by 49.1% in the last year, while units fell by 20.7% according to the Housing Industry Association (HIA).

"We are seeing a record number of detached homes commence construction while at the same time, apartment construction is in the midst of a significant slump," HIA chief economist Tim Reardon said.

"In this market, it is not surprising that detached home builders have dominated the list of the most active home builders in Australia."

Mr Reardon attributes the downturn of new apartments being built to the loss of overseas migration.

"Overseas students, tourists and migrants often stay in multi-unit dwellings when they first arrive in the country," he said.

"This trend was exacerbated by the shift in consumer preferences towards lower density housing."

The data comes in lieu of the HIA releasing its 'Housing 100' report, revealing Metricon was ranked the number one residential builder in the country.

Metricon reported 6,052 builds, with 5,820 of that being detached housing.

The minimum number of homes built to make it into the top 100 rose from 108 to 125 - the largest uptick in 28 years, according to the report.

Over the last year, revenue earned from home construction rose 31.4% to $31.7 billion.

The HIA puts data down to announcement of HomeBuilder pulling foward demand.

According to CoreLogic data, the June 2021 quarter saw construction costs rise 1.4%, with an annual growth rate of 3.9% - the highest annual growth rate since 2014 when it was 1.5%.

Housing market buoyancy caused by bumper housing credit growth

On Wednesday RBA Financial System Assistant Governor, Michele Bullock, made an address today regarding house prices and financial stability.

"The strength in the housing market is positive for the economy, and indeed an important channel for monetary policy to support the economy through housing construction, home improvements and purchases of household items," Ms Bullock said.

However, she warned that the nation's debt to income ratio is high both historically and relative to other countries.

"So sustained strong growth in credit in excess of income growth may result in vulnerabilities building in bank and household balance sheets," Ms Bullock said.

She said despite 'moderation' during Victorian and NSW lockdowns, the housing market's strength has been 'broad', particularly in detached housing.

"In this environment it is unsurprising that housing credit growth has picked up and the rapid rebound in loan commitments suggests some further pickup in growth to come," she said.

Growth in housing is currently running at 7% annually, but recent data on commitments, combined with forecasts could see housing credit peak at 11% early next year, according to Ms Bullock.

Ms Bullock named factors driving this strength, including low interest rates and government support for housing construction.

While Ms Bullock said the HomeBuilder scheme drove housing credit in late 2020 and early 2021, there are recent signs credit is being increasingly driven by purchasing existing dwellings.

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The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

• The big four banks are: ANZ, CBA, NAB and Westpac
• The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
• The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
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Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

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*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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