No Home-building Recovery For At Least A Year, Says Citibank

A recovery in the home-building industry is still at least a year away nationally, and will take even longer to get to Victoria, according to a new indicator published yesterday by Citibank.

Coming on the heels of a dramatic 40 per cent slump in loan approvals for new housing, and a 33 per cent fall in sales of existing homes, Citibank predicts that the volume of new loans will keep dropping slowly in most of Australia for a long time. ``Any sign of a sustained recovery is not likely at least until late 1996," Citibank's senior economist, Mr Stephen Koukoulas, said yesterday. Graphs published in the Citibank report suggested that was an understatement, with no sign of recovery even by mid-1997.

``New lending for housing will remain subdued for several more quarters because of an oversupply of housing in many regions, a relatively low level of immigration, and a slowing of the rate of improvement in labor market conditions," Mr Koukoulas said.

The main exception would be New South Wales, where solid population growth, a strong state economy, and relatively subdued prices should support ``solid housing finance activity through the next several quarters", the report said.

But in Victoria housing finance would continue to weaken throughout 1996, because the state would experience only gradual economic growth. Underlying housing demand would also remain subdued because so many Victorians had moved to other states.

Queensland has a different problem. While population growth is strong and housing prices low, the 1993-94 boom left the state with an oversupply of buildings that will take another year to 18 months to be absorbed, Citibank said.

South Australia and the Northern Territory would be the only states other than NSW to experience any recovery by next year.

The Federal Opposition has called on the Minister for Industrial Relations, Mr Brereton, to repudiate the campaign by building industry workers for a 25 per cent wage rise, saying it made a mockery of the Accord.

The coalition's industrial relations spokesman, Mr Reith, said the Reserve Bank has calculated that wage rises in the building industry already topped 8 per cent in the year to June. The Governor of the Reserve Bank, Mr Fraser, has warned that increases over 5 per cent are inflationary.