New home construction continues to slide, with starts down 7.8% in March quarter: ABS

The seasonally adjusted estimate for new private sector house commencements fell 7.8% in the March quarter, following a fall of 2.6% in the December quarter, according to preliminary estimates from the ABS.

New house starts are down 13.1% for the year to March to 20,306.

More volatile unit commencements fell 21.6% in the March quarter following a fall of 6.3% in the December quarter.

Unit starts are down 37.7% for the year to March to 9,492.

Combined (houses and units) dwelling commencements fell 12.6% in the March quarter following a fall of 4.5% in the December quarter and are down 24.5% for the year to March.

The combined fall was significantly below market expectations, which centred on a 2.3% fall in the quarter noted Commonwealth Bank associate economist Diana Mousina.

"Monthly building approvals data, which tends to be a good leading indicator of quarterly construction data, did not suggest such a large drop in first quarter dwelling commencements.

"The housing market has been a major spot of weakness in the economy and the large fall in housing starts in the first quarter of 2012 confirm this trend," she says.

The number of seasonally adjusted dwelling commencements fell in six of the eight states and territories in the March 2012 quarter.

Dwelling commencements fell by 37.4% in New South Wales, 8.3% in Victoria, 4.8% in Western Australia, 15.8% in Tasmania, 0.4% in the Northern Territory, and 41.2% in the ACT.

Seasonally adjusted dwelling commencements increased by 2.5% in Queensland and by 0.6% in South Australia.

On a trend basis, WA recorded its eighth straight quarter of declining dwelling commencements with Victoria and South Australia recording seven straight quarterly declines.

The HIA says the March quarter figures highlight "the urgency of investment and reform to boost new housing supply".

"Dwelling commencements have been declining since the middle of 2010 and are currently running at an annualised level of 122,492," says HIA chief economist, Harley Dale.

"Excluding the new home building recession around the GST, this is the lowest level for dwelling commencements since the September quarter of 1996. Furthermore, it is a weaker outcome than was evident at any time during the GFC.

"Carve through the current argy bargy about how strong or weak the Australian economy is and you find that new housing is unequivocally weak," says Dale.

Master Builders Australia (MBA) described the March quarter result as "devastating".

MBA chief economist, Peter Jones says the extremely poor dwelling commencements result reflect high levels of consumer caution and low levels of confidence.

“The figures are a major setback for an industry that has now fallen to lows experienced during the global financial crisis. This puts at risk the viability of many building and construction operations," he says.

“The results confirm the urgency of the Reserve Bank’s decision to cut interest rates in May and June.

“Consumers are nervous due uncertainty regarding the Euro crisis, minority government and the pending introduction of the Carbon Tax.

“The glass is less than half-full for the housing sector. Jobs are being lost and more at risk," he says.