The recent rate rise could have a major impact on the already declining level of building activity, according to the Home Industry Association.
“Leading indicators of housing activity have fallen to their lowest level in 15 years and will continue to decline as the full impact of the last nine months of rate increases continues to compound the decline in building activity,” stated HIA’s chief economist, Tim Reardon.
“Loans for the purchase and construction of a new home fell in January to the weakest month since November 2008. This is before the full impact of rate increases in 2022 hit the market, let alone the February 2023 increase.
“There are significant lags evident in this cycle and the full impact of higher cash rates will not be fully reflected in economic indicators until the second half of the year, at the earliest.
“The higher cash rate is compounding the adverse impact of the rising cost of materials, labour and land as well as the increased costs of compliance due to changes to the building code.
“There remains a large volume of work underway that will be completed in 2023 which is obscuring the adverse impact of rate rises on other indicators such as unemployment and economic growth.
“By continuing to raise rates the RBA will inflict further unnecessary pain on the $120b housing sector and related industries,” concluded Mr Reardon.
