POPULAR WORDS

March 10, 2010

Demand for new home loans fell almost 8 percent over January due to the end of the Government’s First Home Owner ‘Boost’ and higher interest rates.

Australian Bureau of Statistics (ABS) figures out today reveal the total number of dwelling finances for owners occupiers (seasonally adjusted) felly by 7.9 percent to be down 12 percent on January last year.

Meanwhile, the number of loans for ‘new’ dwellings (construction/purchase of new dwellings, combined) fell by 3.7 percent over the month.

With all states except the Northern Territory taking a hit, Queensland experienced a 9.6 percent slump in the number of owner occupier loans.

Following last week’s 25 basis point rise in interest rates to 4 percent, Master Builders Australia admits the building industry must remain cautious.

Chief Economist Peter Jones says the investment-driven side of the housing market is still being affected by a lack of project finance due to the credit crunch.

“Master Builders urges the Reserve Bank to take a more cautious approach on interest rates to ensure recovery in the interest-rate-sensitive residential building sector becomes firmly entrenched and is able to lead the economic recovery,” Jones says.

Housing Industry Association (HIA) Senior Economist Ben Phillips agrees the removal of the federal government’s first home buyer boost and increasing interest rates have lowered activity in both the new and existing homes market.

“The Reserve Bank must take stock of the impact that higher interest rates are having on the new homes market. Aggressive interest rate increases will ultimately constrain new housing and push up prices for both home purchase and renters,” Phillips says.

“Population growth across the nation is at record levels, and construction of new housing is lagging badly. The end result is worsening housing affordability and a growing gap between the housing haves and have nots,” he says.

According to today’s ABS data, the total value of dwelling finance commitments excluding alterations and additions decreased 3.3 percent in January.