05 October 2010
A Reserve Bank decision to lift official interest rates by 0.25 per cent today will hurt home builders just when they are vulnerable, according to the Urban Taskforce. The Taskforces chief executive, Aaron Gadiel, said it was the wrong time to increase interest rates.
The Federal Governments construction stimulus is winding down, but private sector home approvals have not increased to fill the gap, Mr Gadiel said.
According to the Australian Bureau of Statistics private sector home approvals have suffered a 7 per cent drop in just six months.
Approvals for private sector freestanding houses have plummeted by 15 per cent in the last eight months.
Approval figures indicate the likely level of construction activity over the next 12 to 18 months, Mr Gadiel said.
“Unfortunately these numbers are not strong enough to ensure a smooth transition from a publicly funded building boom to a robust level of private sector activity.
An interest rate increase will make it harder for private home buyers to fund new home construction and increase the costs of property developers holding land for re-development.
Our national housing undersupply will only get bigger, meaning higher rents and home prices.
Mr Gadiel said that private sector construction activity was at its most vulnerable in Queensland and NSW.
Queenslands private sector home approvals have been trending downwards for six straight months – a 26 per cent fall, Mr Gadiel said.
In NSW August private home approvals fell by 14 per cent.
“Approvals for freestanding houses in NSW have been trending downward for 9 straight months a 14 per cent fall.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
