Home building falls again amid interest rate fears

House building activity fell for a seventh consecutive month in December, new research shows.

The latest Australian Industry Group (AIG)/Housing Industry Association (HIA) performance-of-construction index showed that new orders for house building, apartment building and commercial construction fell to 37.0 in December, whereby anything below 50 indicates a contraction in activity.

AIG director of public policy Dr Peter Burn noted that businesses and home buyers were continuing to refrain from committing to new projects "with expectations of further rises in interest rates a likely factor".

Australians struggling to get onto the property ladder could choose to compare home loans in search of the best options. Also commenting on the data, HIA senior economist Andrew Harvey said the index was the latest evidence that the country is heading into a much weaker period for residential building.

"The wait for affordable land is one of the primary obstacles to new house building in greenfield areas, while the apartment market continues to struggle under tough credit conditions," he said.

"A sustained period of contraction in both of these market segments will continue to lock many prospective homebuyers into the rental market for years to come."

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