After record low cuts on cash rate last month, the RBA has held rates steady at 1.00%, indicating that the RBA is 'cautiously optimistic about the economy'. While eyes remain on the US-China trade war, however, which continues to be a key influence in any further moves, the RBA also expects the economy to strengthen, driven by cash rate cuts and infrastructure spending by local and state governments.
Within the residential property market, the lifting of credit restrictions on banks has also seen signs of a turnaround along the Eastern Seaboard and in major cities (Sydney, Melbourne and Brisbane). Investors home loans have increased for the first time in 11 months by 1.9% to $16.8 billion, seasonally adjusted. Owner-occupiers are also up by 2.4%.
These encouraging indicators are also reflected in auction clearance rates, with the week ending 24 August recording a clearance rate of 77.0% in Melbourne from 662 auctions, the highest clearance rate since November 2017. With this clearance rate coming in, Melbourne records a clearance rate of over 70% for 6 of the last 7 weeks.
However, while auction clearance rates rise and buyers return to the property market, the construction industry is facing a different set of challenges.
Overall, the industry is seeing a steep lump, with the sharpest decline in activity in six years, according to the ABC report. The Australian Performance of Construction Index (PCI) fell 3.9% to 39.1%, its 11th consecutive month of decline. this has also resulted in a fall in employment across the sector, declining by 7.7% to 35.9%.
An HIA analysis found that the number of high-rise residential approvals have taken a significant hit, down 41.8%. This decline is not so surprising, given that the outlook of the construction crisis remains gloomy, and both buyer confidence in high-density developments and apartment construction have seen steep declines.
The HIA analysis predicts a further 12% decline in apartment construction in 2019-20 with gradual improvements in 2021-22. Construction for residential housing is also expected to see a further 7.6% decline, stabilising over 2020-21. (ET)