The Bureau of Statistics says only 667 NSW residents took out construction loans in January, down from a high of 1270 in September before rates rose and the First Home Owners Boost wound down.
Only 472 loans were issued to buy new houses, down from roughly double that a few months earlier.
Loans to buy established houses also halved, sliding from a peak of 19,100 in March to 10,041 in January.
The NSW slide was mirrored nationally, with only Victoria and the Northern Territory showing resilience.
"Things are likely to look weak from here on"... said CommSec economist Savanth Sebastian. "Potential home buyers brought forward planned purchases to 2009. Overall the housing sector is likely to cool for the next few months. It is understandable there would be a period of consolidation after the past year's phenomenal run."
Detailed consumer sentiment figures released yesterday echoed the lending news. The proportion of Australians agreeing that "now is a good time to buy a dwelling" fell from 53 per cent in December to 42 per cent in March.
In September before the rate rises and the the phase out of the boost 62 per cent of those surveyed believed it was a good time to buy a house.
The proportion agreeing that the wisest use for savings was "paying down debt" climbed to 27 per cent, its highest level on record.
While refusing to be drawn on interest rates a Reserve Bank official yesterday had further bleak news for homebuyers.
Assistant Governor Philip Lowe told an urban development conference in Sydney to expect further increases in house prices unless something could be done to ease "constraints" holding back the construction of new homes.
"With population growth above average, and growth in the housing stock below average, it is not surprising there has been upward pressure on housing costs," he told the conference. "If we are to build more dwellings, we need to ensure that planning guidelines and infrastructure provision can accommodate this," he said.
For the first time in decades the long-term trend of fewer people living in each dwelling had gone backwards.
"Obvious examples are the trend towards young adults staying in the parental home longer and a rise in the number of people sharing accommodation."
Dr Lowe said while much more money had been poured into housing than before, much of it had been spent on renovations and bigger houses rather than more new houses. "In a sense, as a society we have made a trade-off between quality and quantity. We have implicitly chosen to build bigger and better-appointed dwellings rather than more dwellings," he said.
Other analysts questioned the worth of the ABS figures. "I have always held a special kind of hatred for colleagues who react to data with a nonchalant 'I don’t believe the numbers', said ICAP Australia's Adam Carr. "But I have to confess I am sorely tempted. The reported fall in lending is at odds with auction clearance rates, house price growth and building approvals. Call me stubborn, but I’m not getting overly concerned just yet that lending is genuinely collapsing."
Westpac chief economist Bill Evans said mortgage rates were not yet high enough to dent consumer confidence.
"History suggests 7 per cent is the threshold rate. The variable rate is now averaging 6.9. We may be nearing the point at which consumer confidence becomes much more sensitive to rate hikes."
Home lending since September:
NSW down 43%
Queensland down 39%
South Australia down 37%
Tasmania down 33%
Western Australia down 32%
Victoria down 30%
Thinking of buying a home?
Good time Bad time
March 2010: 42% 29%
Dec 2009: 53% 26%
Sep 2009: 62%: 17%
Jun 2009: 63% 17%
Mar 2009: 61% 18%
Melbourne Institute Consumer Sentiment Survey, unpublished data
Published in today's SMH and Age
. Westpac, the Commonwealth and the ANZ treat us gently, for now
. Our real estate boom will soon slow
. What gives with RP Data? What gives with Kris?