Interest rate cut a housing saviour as families able to build bigger homes: HIA

The Reserve Bank’s cash rate cut may get more new homes built than any policies from the federal or Victorian governments in the past two years.

It comes as two of the state’s biggest building groups have revealed for a typical family able to get $500,000 from their bank at the start of last week, the $11,000 increase in borrowing capacity will mean they can add an extra bedroom to their floorplan.

Last week the RBA ­announced a 0.25 percentage point reduction to the nation’s cash rate, which underpins the interest rates set by lenders.

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A few days later the Housing Industry Association released housing construction forecasts showing the nation would fall close to 200,000 homes short of the federal government’s target of 1.2 million new homes by 2029.

The lobby group is estimating builders will start work on just over 174,000 new homes this financial year, almost 66,000 short of the 240,000 annual goal set by the Albanese government for 2024 to 2029.

The RBA’s decision to cut rates might help more homes get built, according to HIA’s latest forecast. Picture: NewsWire / Gaye Gerard

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The HIA forecasts suggest that by the end of the planned construction timeline, the nation will still be falling short of the figure needed to address Australia’s housing shortage, while Victoria will fall even further short of its goal to build 80,000 new homes a year.

Combined totals of houses and unit builds in the 2028 and 2029 financial years are forecast to be 209,600 and 212,770.

HIA senior economist Tom Devitt said the government needed to do far more to hit its goals, as even an up tick caused by the interest rate drop would not make up the difference.

“In terms of what’s actually been done, the interest rate cut might be the most consequential,” Mr Devitt said.

Burbank national sales general manager Anthony Garrubba said his firm was expecting an increase in interest with large numbers of prospective buyers having been sitting on the sidelines waiting.

Reserve Bank of Australia Governor, Michele Bullock announced the decision to cut rates last week. Picture: NewsWire / Martin Ollman

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Mr Garrubba estimated that even just the initial 0.25 per cent interest rate cut was enough to turn a three-bedroom new home into a four- bedroom one, for those whose borrowing capacity had just gone from $500,000 to $511,000 as a result.

“And, over a year, if it’s four cuts, that’s a different home; that could be almost the difference between a single and a double storey,” he said.

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However, Victoria needed to follow Queensland in offering first-home buyers willing to build a property $20,000 in government grants. Currently the First Home Owner Grant provides $10,000 in Victoria.

“Ten thousand dollars extra would 100 per cent have a meaningful impact on aiding buyers in getting into the market,” Mr Garrubba said.

Metricon sales general manager Drew Glascott estimated the cost of adding an extra bedroom, where the allotment allowed, was $6000 to $8000.

Nicole Lawler and George Boakye, who are currently renting their home in Caroline Springs but in the process of building a property in Weir Views, said prior to the rate cut the RBA’s decision carries significant weight as they face a significant shift in their home loan size in the near future. Picture: Tony Gough

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With an extra $10,000 to $11,000 a homebuyer could look at a butler’s pantry, a “fully decked-out study” or a substantive upgrade to an ­existing home design.

Mr Glascott added that in many cases it could also be the difference between being able to afford to buy or not.

He added that some developers offered rebates of up to $30,000 in Victoria.

there.”

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