Rates steady, but rents rampant
THE NUMBER of new houses and apartments under construction in NSW has slumped to its lowest yearly level in 38 years, with the weak property market likely to put even more pressure on rents.
But the Reserve Bank was the surprise bearer of good news yesterday, suggesting interest rates may remain on hold in the coming months.
The number of new dwellings under construction fell in the first three months of the year, a Bureau of Statistics report released yesterday showed, in what has been a stagnant market for more than four years.
Economists said the drop would exacerbate the already high cost of renting - particularly in NSW and Sydney. But the Reserve Bank is unlikely to add to problems faced by borrowers and renters in the immediate future.
Minutes of its latest board meeting released yesterday said the current level of interest rates was doing its job in slowing the economy. Rapid wages growth was the main risk for higher interest rates, the minutes said.
Builders and developers started construction on 6 per cent fewer houses in the three months to March than they did in the previous quarter, offset by a small lift in the number of new apartments, the bureau's figures showed.
A CommSec economist, Savanth Sebastian, said the housing crisis would continue to worsen, particularly in NSW. "While NSW housing starts rose in the latest quarter, the number of dwellings commenced over the past year was actually the lowest in 38 years," Mr Sebastian said.
The figures came a day after the release of a Senate report into housing affordability that suggested the $7000 grant for first-home buyers had helped drive up house prices and disadvantage renters.
However, the Government is resisting calls to modify the grant to boost the incentives for new construction.
"We don't have any plans to change the first-home owners grant," the Minister for Housing, Tanya Plibersek, said.
"As the first-home owners grant falls under the inter-governmental agreement between the Commonwealth and the states and territories, any changes would require agreement from all parties," she said.
The Senate report recommended lowering the grant for people buying existing properties, but increasing it for new properties to encourage more housing supply.
The real estate industry was quick to dismiss the idea, saying it would reduce choices available for people wanting to buy a home near jobs and infrastructure.
"It is not practical or equitable to suggest that first-home owners should be concentrated in new housing developments, often distant from schools and employment opportunities," the Real Estate Institute of Australia president, Noel Dyett, said.
Across the country, the number of new houses and apartments being developed fell 3.3 per cent in the March quarter.
The Housing Institute of Australia's chief economist, Harley Dale, said the addition to the housing stock in the past year was at least 25,000 short of what was required to satisfy underlying demand.
"Several years of low home building has meant that Australia has now accumulated a huge shortage of housing for both the owner-occupied and private-rental market," Mr Dale said.
Master Builders Australia said there was a yearly shortage of 40,000 new houses.
The number of new dwellings being built in NSW has almost halved since the peak of the market in 2002.