By Peter Jean and Ben Packham – Courier Mail
June 11, 2008 08:44am
DEMAND for home loans is crumbling as would-be buyers are scared away by high interest rates.
Economists predicted yesterday that the property market would remain sluggish for the rest of the year.
The number of loans taken out for owner-occupied homes in Australia fell by 3 per cent in April, to a seasonably adjusted 57,503, Australian Bureau of Statistics figures showed.
It was the third month in a row that home loans fell across the nation.
Economists had forecast a 1.9 per cent fall for the month.
The slump suggests interest rates and soaring fuel prices have caused a serious slowing of the economy.
“Consumers are being battered from all sides,” Comm-Sec chief economist Craig James said.
“It’s not just the Reserve Bank lifting rates, it’s the fact that individual banks have been forced to lift rates, the cost of petrol has been going up, food is going up. It’s all putting pressure on people’s budgets.”
Mr James said the figures were “super-weak”, capping the biggest slump on record.
“This isn’t just another modest drop. This has been the third significant fall in home lending,” he said.
“We’ve had something like an 18.4 per cent fall in new home loan lending in the past three months.
“We haven’t seen a decline like that ever before.”
He said the slump would have a serious impact on the supply of homes, given rising immigration levels.
On the up side, Mr James said there was now little chance of an interest-rate rise before the end of the year.
“The Reserve Bank certainly doesn’t need to be following up with any further interest rate action at this time,” he said.
“The economy has already responded, slowing down significantly.”
Macquarie Group senior economist Brian Redican said the high interest rates would keep stifling the depressed housing market.
“There’s certainly no sign of a turnaround in the housing market, probably for 2008,” Mr Redican said.
“Until we start to see interest rates fall, and that certainly seems a long way away at the moment . . . all the risk remains on the downside.”
Housing Industry Association chief economist Harley Dale said though the property market was subdued, there was still a shortage of homes for sale and available for rent.
“HIA has maintained for some times that Australia needs to produce 175,000 to 180,000 new residential dwellings a year to meet current and anticipated demand,” Mr Dale said.
Tags: budgets, rising interest rates
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June 16th, 2008 at 8:08 pm
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