The Reserve Bank of Australia must cut interest rates at its next meeting to avoid a further decline in the national housing sector.

“That will mark five consecutive years of weak new home building which is unprecedented in the last 50 years,” - Harley Dale

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Rate Cut Needed

The Reserve Bank of Australia must cut interest rates at its next meeting to avoid a further decline in the national housing sector.

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Rate Cut Needed

News: 13 Aug 2008
The Reserve Bank of Australia must cut interest rates at its next meeting to avoid a further decline in the national housing sector, the Housing Industry Association has warned. HIA, Australia’s largest building industry association, stated that housing finance figures for June this year indicated a dramatic decline in home lending for both investors and owner occupiers, reflecting an urgent need for reduction in mortgage and business loan rates.

The June figures showed a 3.7 per cent fall in the number of owner occupier loans, and a 2.7 per cent decrease in construction loans, while lending for established dwellings fell 6 per cent.

HIA Chief Economist Harley Dale said that even with a reduction in interest rates in coming months, housing starts in 2008 would still be less than last year. “That will mark five consecutive years of weak new home building which is unprecedented in the last 50 years,” he said.

“The Reserve Bank, retail financial institutions, and every level of government all have an urgent role to play in turning around a long, sustained period of construction weakness which continues to manifest itself in a chronic shortage of new housing stock.”

Although loans for the purchase of a new home increased by 6.9 per cent, this rise is meagre following eleven consecutive falls. Loans for residential investment are at a record low since October 2006. 

On a state by state basis, all but Tasmania and the Australian Capital Territory have experienced a total loan decline. The largest drop was in the Northern Territory, where loans fell by 8.5 per cent, with New South Wales following at a 6 per cent loss.

By Rebecca Howden
13th August 2008

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