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04/08/2010

Sales of new homes in Australia dropped 5.1 per cent in June, the second straight month of sizeable falls, as higher mortgage rates hit demand while tight credit restrained supply, an industry survey showed.
 
The Housing Industry Association said its survey of major builders showed sales of private dwellings were at a 17-month low.
 
Sales of detached new homes dropped 6.6 per cent, outweighing a 10.3 per cent rise in sales in the volatile multi-unit sector.
 
The association's chief economist, Harley Dale, said the withdrawal of monetary and fiscal policy stimulus was hurting the sector.
 
The Reserve Bank of Australia lifted interest rates by 150 basis points between October last year and May, while commercial banks pushed mortgage rates up more to cover rising funding costs.
 
The central bank's key interest rate is now 4.5 per cent.
 
While higher rates were crimping demand, the supply of new homes was also being constrained.
 
"Supply side obstacles, including a lack of affordable land and tight credit availability for residential development, are weighing down considerably on the new-home building sector," Dale said.
 
"Inaction means that Australia's dwelling shortage will continue to increase, pushing up existing house prices and disadvantaging households seeking to purchase or rent a dwelling."
 
Unlike the United States, there was never a boom in home building in Australia that left a huge overhang of unsold homes.
 
Indeed, analysts estimate new-home building has undershot demand for several years, particularly as Australia's population growth has been running at its highest in 50 years.
 
That is a major reason home prices fell only modestly during the global financial crisis and have since recovered quickly to reach new record highs.
 
Reuters
 
This article can be found on South China Morning Post, Wednesday, August 4, 2010



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