The number of new homes being built could decline by a further 11 per cent by the end of the year, according to the Housing Industry Association. 

The HIA released its quarterly economic and industry outlook on Wednesday, featuring updated figures for the states and territories.

Economist Tim Reardon identified the decline in the number of dwelling approvals as one of the primary concerns of the current market.

At a glance: 

• The Housing Industry Association released its quarterly economic and industry outlook on Wednesday. 
• HIA Chief Economist Tim Reardon said the decline in building approvals so far this year was "a concern".
• Mr Reardon said an easing of the Australian Prudential Regulation Authority lending restrictions would have a greater impact than an interest rate cut.

"With this poor quarter of results, the number of new homes being built has fallen by 15.2 per cent this year and a further decline in activity through this calendar year of around 11.0 per cent is expected,” he said.

“At the start of 2019 the most encouraging news for the building industry was that a strong national economy would be sufficient to pull the home building industry through this downturn.

"These hopes fell away as GDP slowed."

The HIA Outlook coincides with new figures from the Australian Bureau of Statistics, showing that detached approvals were down 13.5 per cent in the March 2019 quarter, compared with the same quarter of the previous year.

Multi-unit approvals were also 33 per cent lower compared with the same quarter last year.

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Source: HIA

Mr Reardon said the current lending climate meant that what had previously eased pressure on the market may not have the same effect going forward.

"Unfortunately, a cut to interest rates in 2019 will not have the same positive impact on new home building as in previous cycles," he said.

“Banks are assessing borrowing capacity against a minimum floor of a 7.25 per cent mortgage rate and for ‘Interest Only’ loans to be assessed on a Principal and Interest basis for the term of the loan.

"An easing of APRA’s lending restrictions would have a more significant impact on home building and the broader economy, than a further cut to interest rates alone.

“Regardless of the timing of a cut to interest rates or the repeal of regulatory restrictions in the housing market, the impact of a slowing economy and the ongoing impact of the credit squeeze will continue to force new home building lower."

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