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Home building prospects likely to improve

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A message to horse builders from Senator the :ion. Dame Annabelle Rankin, D.B.E., Commonwealth Minister for Housing.

With our entry into the new financial year, a number of factors are operating to half the downturn and bring about an expansion in home building activity. I am confident that the number of dwellings being commenced will soon be rising again.

Commonwealth expenditure is now running far in excess of receipts. This makes more money available to the public, including the private institutions that make housing loans. This is also the time when many home-seekers are adding to their personal savings the amounts of the income tax refunds now being received.

There is therefore every reason to expect that the banks, in particular, will be able to approve substantially more housing loans, and that the number of housing loans approved by permanent building societies will also rise, perhaps slowly at first, but at an accelerating rate in a few months time.

t The States have decided to allocate to housing a record ^a142.55 million from their borrowing programos for 1970-71. This

represents an increase of about 8 per cent over last year's allocations. At least 30 per cent of this is now available to the Home Builders'

Accounts in the States for lending to building societies and other ap,-roved institutions. The States are in a position to lend this money quickly and to commence more , dwellings for themselves.

Housing demand should continue to rise as the numier of marriages registered increases. The gain from oversea migration is running at more than 120,000 per annum. Incomes are currently higher than they were twelve months ago. The average weekly

earnings of wage and salary earners rose by about 3 per cent in


Although commencements have fallen in recent months and, I think, will fall further in the current quarter, I firmly believe that the number of d wellings commenced will soon be rising again. Nevertheless, the next few months could be a disturbing period for a number of home builders.

There have been a number of reasons for t h is decline. The

number of houses and flats commenced in Australia rose from 107, 200 in 1965-66 to 139,300 in 1968-69 the increase in 1963-69 being 15,800 or a rise of more than 12-w per cent. In the latter half of 1969, conLtencements tended to flatten out at the very high level of about 145,000 per annum. In the past six months signs were appearing that home building was more than sufficient to meet

demand in one or two regions.




Early this year, there were growing signs that the economy as a whole was becoming overheated, that available labour was becoming scarcer, and that costs and prices were beginning to rise at an accelerating rate. Happenings in the home building industry were no exception. The prices of building materials and building labour were actually rising faster than in most other industries.

Due largely to the tighter monetary situation that developed during the first half of 1970, but also to the tendency for the supply of homes to exceed effective demand in a few regions, there was a significant decline in the number and value of housing loans approved, especially in the June quarter.

The main factor that caused the present slowing-down in home building was the tightening of the money supply.The effects of this are still with us. They were felt differently by differing types of lending institution. A relatively large number of housing loans continued to be approved by banks and life offices during the

June quarter. It was the permanent building societies, which in 1969-70 approved about one-third of all private institutional housing loans to individuals in Australia, that were most affected by the tighter monetary conditions.The full effect of these came

at a time when members of permanent societies were making their customary seasonal withdrawals for taxation and other end-of-year purposes. Thus the societies had to curtail new loan approvals

rather more than in preceding years.But they did not cease to approve new loans. The value of housing loans approved by the permanent building societies in the June quarter is believed to have been in excess of $50 million.I have no doubt that new loan

approvals by the permanents will rise slowly during the current quarter and at an accelerating rate in the months thereafter.

On a seasonally adjusted basis, approvals to build new houses and flats were close to 13,500 a month from July 1969 to March 1970. Comparable approvals in April were 12,620, in May 10,660 and could be fewer than 9,500 in June. But the fall in

commencements will be proportionately smaller than the decline in approvals because many of the dwellings approved for construction in the December and March quarters were not commenced.

Commencements fell from 35,400 new houses and flats in the December quarter 1969 to 33,900 in the March quarter 1970. Commencements in the June quarter are estimated by my Department to have been about 31,000. Moreover, the decline in the numbers of housing loans made and dwellings approved for construction in the June quarter will almost certainly result in a further decline in

commencements in the current quarter.The decline is occurring largely in the private sector. However, I do expect the rate of commencements to be rising again soon.

The States most affected are Western Australia, New South Wales and Queensland. These are the States in which the permanent building societies have been relatively most active.



Although the home building industry in every State is currently experiencing some measure of decline in its activities, in most States there is still a substantial volume of work in the pipeline. Overall, the volume of work being carried out by home builders is unlikely to decline by much more than 10 per cent before it resumes its rise, although the experience of individual builders will vary.

That is the message in all this for the home builder? The longer-term prospect remains bright. Australia's continuing growth requires more homes and, with our rising level of incomes, we will be able to afford better homes. But the next few months may well be a worrying time for many home builders.

The fact that the overall decline in home building activity that has occurred has produced a barely significant increase in unemployment amongst skilled building workers, apart from bricklayers in Western Australia, has revealed the present strength of overall

employment in the building industry. Many of the workers not immediately required to build homes have found employment in non-residential construction which is little short of booming. Although this is no comfort to the home builder vho has reluctantly

decided he must reduce his labour force or dismiss some office staff, it does show how fully occupied the building industry is. It appears that we will have to be content with fewer commencements in 1970-71 than the near record number started in 1969-70. Even though most materials are not in short supply, the future rate of

expansion of home building will be limited to a degree by availability of building workers.

The Government fully appreciates the need for more homes, and I feel confident that our policies and actions will put a halt to the decline and set home building on an upward course before the end of 1970. A climate favourable to some new expansion in home building activity is now being developed.

I conclude by repeating and stressing my confidence that the number of dwellings being commenced will soon be rising again.

16 July 1970.