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Grant to go but developers stay positive

But property trust analysts now believe the end of the stimulus package will not be a disaster for developers, as first feared.

In the latest round of statistics for September, lending for new houses soared to 14?-year highs.

Construction loans rose by 8.1 per cent, while the value of all loans rose by 4.8 per cent in the month. Lending rose most in Western Australia and NSW.

The chief economist at CommSec, Craig James, said first-home buyers rushed the government grant before it was decreased.

"Those who entered a contract to build a new home before September 30 were eligible for a $21,000 grant," he said. "That grant phased down to $14,000 from October 1 and will phase down to $7000 from January 1 next year.

"It may prove to be a short, sharp shock but the lift in construction is great news for builders and the economy as a whole. More homes need to be built to house our growing population and the grant will go some of the way to ensuring that will happen.

"But to sustainably plug the gap between supply and demand it will be up to all areas of government to reduce the costs faced by developers in advancing new projects."

The analysts at Citi said the value of owner-occupier finance approved was at a six-year high. As a proportion of all dwellings financed, first-home buyers accounted for 26.1 per cent, a 1.4 percentage point increase from August. Dwelling construction rose 8 per cent for the month.

"The Australian population is growing at its fastest rate since the 1960s and the stronger demand for housing needs to be met by new supply to avoid unnecessary increases in dwelling prices that would add to inflation," Citi's analysts said.

"As it stands, housing commencements of around 125,000 units per annum are behind estimates of underlying demand. It is not surprising, therefore, that established house prices have accelerated in both upper and lower-priced suburbs across the country."