Housing industry blasts RBA rate rise

Housing industry blasts RBA rate rise

By , May 06 in blog with 0 comments

The housing industry has lashed out at the Reserve Bank’s rate rise today, claiming it will discourage the construction needed to relieve the nation’s housing affordability crisis.
One developer went further, claiming future rate hikes threatened to trigger a collapse of Melbourne’s housing market.
The RBA lifted interest rates to 4.5 per cent from 4.25 per cent today, pushing up the monthly cost on an average $300,000 mortgage over 25 years by $46. It’s the sixth increase since October, which together have added an estimated $300 in monthly repayments to borrowers.
Housing Industry Association senior economist Ben Phillips predicted housing affordability will sink to new lows in the coming year as interest rates rise and the nationwide shortage swells to 200,000 homes.
”Negative signs are already appearing in the new homes market with both building approvals and home lending figures down over 2010,” he said.
Rising costs for loans shrinks the number of would-be purchasers of homes. That in turn saps the demand for the new construction of homes, although substantial numbers of would-be buyers are estimated to be avoiding the supercharged market in which prices jumped 20 per cent in the year to March.
Mr Phillips said higher interest rates wouldn’t help the increase the supply of housing stock called for in the Henry Tax Review released this week. The government either shelved or rejected recommendations including the introduction of a land tax and reductions to negative gearing deductions.

RBA ‘out of its depth’

Leanne Pilkington, general manager of Sydney real estate agency network Laing+Simmons, said the rising interest rates confirmed that ”the RBA is out of its depth when it comes to devising measures to control an overheated housing market.”
Blaming the imbalance between housing supply and demand, Ms Pilkington said, ”Interest rate increases are clearly having no impact on dampening inflated residential property prices, particularly in New South Wales.”
Victorian property developer Villawood Properties labelled the RBA’s rate move ”impetuous” saying the demand in the Melbourne market is already slowing and further rate rises could trigger a housing collapse.
”With much of the demand in the current market fuelled by foreign investment, the Federal Government’s recent proposed restrictions will assist to ease demand on its own – without the need for today’s rate increase,” said Villawood Properties executive director, Rory Costelloe.
”Should the RBA continue to push rates skyward Melbourne’s strong property market is likely to experience a housing collapse.”
Melbourne led home price rises in the past year among capital cities, rising almost 28 per cent in the year to March, the Australian Bureau of Statistics reported yesterday.
The government has tightened requirements on foreign buyers last month in response to anecdotal reports of a flood of overseas money coming into the local real estate market.

Impact felt

Australasia’s largest real estate and property group, Ray White, said the central bank’s interest rate strategy was finally having an effect on residential sales.
The Ray White Group’s Australian business grew by 8 per cent in April, compared with a year earlier.
”This was the slowest increase on (the) previous year’s results since the economic downturn of late 2008,” said Ray White Joint Chairman Brian White.
”Judging by our April results, it looks as if the interest rate increases are having an impact on activity in the Australian residential market,” the company said in a statement.

czappone@fairfax.com.au


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 Housing industry blasts RBA rate rise Mike Andrew has been working with the Internet and small business for over 12 years. Mike has been a keynote speaker at conventions and seminars and conducted social media training sessions all over the world. Mike has an extensive media background having worked in electronic media for over 30 years. Mike specialises in social media and Internet marketing strategy, SEO techniques and search engine marketing campaigns. His articles appear on numerous blogs around the web as well as national magazines.

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