The Housing Industry Association (HIA) reported that the flow of new homes being approved for construction continues to decline as home prices in Sydney and Melbourne track lower and housing finance becomes harder to access.

Australian Bureau of Statistics (ABS) data showed that a total of 17,070 homes (seasonally adjusted) were approved for construction in the month of October 2018, which is 1.5% lower than the previous month and 13.2% lower than October of last year.

HIA further stated that the monthly falls in total approvals were due to sliding multi-unit homes (-5.4%). Detached house approvals, on the other hand, increased by 1.7%.

HIA Economist Diwa Hopkins said that the credit crunch is significantly impacting the new home building sector.

“While APRA’s restrictions were designed to curb high-risk lending practices, ordinary home buyers are now also experiencing delays and constraints in accessing finance. A credit squeeze has emerged in the latter of half 2018, and this is playing a major role in slowing the flow of new home-building work entering the pipeline,” she said.

Given the state of things, households that wish to purchase new homes are likely to receive insufficient finance, while those who have adequate funds have to wait longer before they can own a home.

Hopkins said that while a downturn in new home building has been expected, the credit squeeze at present risks the pace and magnitude of the decline turning into something faster and greater than what was projected. As a result, this would weigh on the wider economy.

Total seasonally adjusted dwelling approvals in October 2018 dropped in South Australia (-17.0%), Tasmania (-3.0%), Victoria (-2.6%), Queensland (-1.1%), New South Wales (-0.5%) and Western Australia (-0.1%). In trend terms, total dwelling approvals in October declined by 12.5% in the Northern Territory, while the Australian Capital Territory bucked the trend, up by 0.8%