Tuesday, August 30, 2011

House building. The worst month since...

A “perfect storm” of collapsing confidence has pushed new hosue sales to their lowest point in a decade, plumbing depths last reached after the introduction of the goods and services tax.

The Housing Industry Association index shows just 5701 new freestanding houses were sold in July, down 19 per cent on the more-typical 7036 sold three months earlier.

New house sales collapsed 9 per cent in June and a further 9 per cent in July, as already weak demand was hit by a crisis of confidence.

“You had the combination of the interest rate uncertainty, the uncertainty about the carbon tax, the uncertainty about the fragile nature of the federal government, and you had all the global bad news as well, ” said HIA chief economist Harley Dale.

“Consumers were cautious anyway in the wake of the global financial crisis. Then they were hit by this - it accelerated the downward trend.

Dr Dale says the figures are worse than they look. Although July was the worst month since December 2000, that month was unusual as the building industry was reeling from the effects of the July 2000 introduction of the goods and services tax. Leaving the GST period aside there probably hasn’t been a worse month since the interest rate hikes of the early 1990s...

If building weakens further it will approach the lows of of 140,000 annual home and unit starts seen in the global financial crisis.

“It will be back into where we were in the GFC, except now we won’t have a GFC. The residential building industry will need some sort of short term stimulus. I know manufacturers are asking for help, but we will need it too, for related reasons.”

“The underlying demand for new accommodation is around 175,000 dwellings per year. The actual demand is now well below that, setting the scene for a housing crisis.”

At the October tax summit the Association will be pushing for tax relief arguing that new housing is taxed far more heavily than existing housing.

“You pay goods and services tax on new housing but you don’t on existing property; you have a cascading issue with paying stamp duty at various levels with new housing that you don’t with existing property; you’ve got indirect taxation like infrastructure charges, you’ve got hidden taxes like unnecessary costs to business form avoidable planning delays. If you throw it into the mix you’ve got a very heavily taxed sector.”

Published in today's SMH and Age

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