Housing finance tumbles further
The RBA is being urged to keep rates on hold when they meet again in August, after housing commitments fell for the fourth time this year.
According to data from the Australian Bureau of Statistics (ABS), the total value of housing finance commitments fell by 0.3 per cent in May after a brief recovery in April.
The first home buyer market suffered the greatest fall in commitments, with the sector accounting for just 16.1 per cent of all dwellings financed – a 0.2 per cent drop from April.
“We are seeing the cumulative effect of six increases in official interest rates between October last year and May this year,” Real Estate Institute of Australia (REIA) president Mr David Airey said.
According to Mr Airey, the RBA’s decision to pause rates in June was “long overdue”.
“The message for the RBA is abundantly clear”, he said.
HIA chief executive Graham Wolfe said the result was not just a product of interest rate increases, but upward price pressures sourced from tight credit availability, and obstacles related to land supply, planning, infrastructure charges and taxation.
“Impediments to a sustained housing recovery must be removed if we are to have any chance of supplying sufficient new housing to meet demand,” said Mr Wolfe.
“HIA estimates that the underlying demand for housing in 2010 is running at 190,000 dwellings per year. Yet, housing starts in 2010 are forecast to total only 165,940. This should be a signal to the Reserve Bank that steady rates are the appropriate course for the remainder of 2010,” he said.