The Reserve Bank of Australia (RBA) has once again increased interest rates, this time by 0.25% in February 2023, marking the ninth consecutive rate hike. As the economy continues to recover, many are concerned about the impact this will have on the building sector in Australia.
According to the Australian Bureau of Statistics, only 27,000 new homes were built in Australia in the last quarter of 2022, a 7.2% decline from the previous quarter. The construction industry has long been considered a leading indicator of economic growth as it is a significant contributor to the economy and creates jobs.
A recent survey conducted by the Australian Bankers' Association showed that in the last 6 months, over 100 local businesses in the building sector have had to shut their doors. These businesses are spread across various regions in Australia, with the majority found in New South Wales and Victoria.
In some areas of Melbourne, such as the Inner East and Bayside regions, we have seen a significant decline in property prices and a decrease in demand for new homes. The average property price in these areas has dropped by 10%, with the median price in the Inner East dropping from $1.5 million to $1.35 million and in the Bayside region dropping from $1.2 million to $1.08 million.
With the latest RBA rate hike and inflation rate at 7.8%, business and homeowners are being forced to tighten their belts. According to the Australian Bankers' Association, 67% of small business owners have reported that they have had to make significant cuts in their budgets in order to stay afloat.
In conclusion, it is important to keep a close eye on the impact of the latest RBA rate hike on the building sector in Australia. With fewer homes being built and many businesses struggling to survive, it will be crucial for the government and other stakeholders to work together to find ways to support the industry and help it recover.