May 17, 2011 – As buyers stayed out of the housing markets along with price growth, lower expectations, and uncertainty about further interest rate increased, the number of home loans approved in March fell to a 10-year all time low.
In March, the number of home loan approvals dropped 1.5 per cent, to a seasonally adjusted 44,968, its lowest level since February 2001. Economists’ forecasts had focused in a rise of 2 per cent in housing finance commitments for the month.
Loans for the construction of new dwellings eased at 1.1 per cent; however, the biggest dive was a 1.8 per cent drop in loans for established homes, even though a 2.4 per cent increase in loans was seen for the purchase of new homes for sale.
According to the Australian Bureau of Statistics reports, the total housing finance by value dropped by 0.1 per cent in March, seasonally adjusted, to $19.300 billion.
Adam Carr, ICAP economist said that people were being more cautious because ‘‘home prices weren’t jumping 20 per cent’’.
He said, “There’s no incentive to dive into the housing market. There is no rush. The Reserve Bank knows lending has been weak. People need to accept the reality that we don’t want a credit boom during a mining boom”.
“Interest rates are in no way clamping down on the lending market at the moment,” he said, adding that “these are great numbers from an RBA interest rate policy perspective.”
Michael Turner, RBC strategist, says that there are several factors that have stopped people from taking out new mortgages.
Mr. Turner told ABC News, “The last RBA rate hike came in November, which wasn’t that long ago, and it came with an extra 15 or so basis points from the major lenders, and in that period house prices have softened a little bit [and] mortgage rates are above decade averages”.
“There seems to be little urgency in buying up property at the moment.”
Harley Dale, the Housing Industry Association’s chief economist, says that three straight falls in housing finance have been seen which totals to 12 per cent fall over the March quarter.
He said, “New housing starts peaked back in mid-2010 after only four quarters of growth. Leading indicators such as housing finance highlight a risk that starts revisit levels akin to those experienced during the GFC”.
“The loss of momentum in the housing supply reform process has combined with heightened interest rate pressure to deal a telling blow to new residential construction at the very time when a sustained boost to supply was the required outcome.”
According to the HIA, over the next few months, the stalling housing market should provide a strong reason for the Reserve Bank to keep interest rates on hold.
