Higher interest rates are starting to bite down on potential home buyers new data has revealed.
According to the Australian Bureau of Statistics, the number of owner occupier loans for new housing fell in December 2010, driven by a marked fall in lending for the purchase of new dwellings.
HIA senior economist Andrew Harvey said that in December 2010 the number of loans for the purchase of new dwellings fell by 10.1 per cent while the number of loans for the construction of dwellings increased by 1.0 per cent.
“Given the November 2010 interest rate hikes by the Reserve Bank and Australia’s trading banks it’s no real surprise that there is not much to love about the Valentine’s Day housing finance figures,” Mr Harvey said.
“Whilst the December fall in new home loans follows a welcome run of three months of increases, the impact of the Melbourne Cup day hikes is now emerging and combined with ongoing credit constraints will flow through to softer housing starts during the first half of 2011.”
On a more positive note, Mr Harvey said it looks like first home buyer loans have found a base, despite being down by 41 per cent in the three months to December 2010 when compared to the same period in 2009.
“If we see a return of first-home buyers to the market this year it will likely be driven by disenchantment with paying increasingly high rents, but for there to be any upward momentum in overall residential building activity we will need to also see an increased level of interest from trade-up buyers and investors,” Mr Harvey said.
In seasonally adjusted terms, in December 2010 the total number of owner occupier loans increased by 4.8 per cent in New South Wales, 3.3 per cent in Victoria, 2.0 per cent in Queensland, 0.3 per cent in South Australia, 0.9 per cent in Western Australia, 4.8 per cent in Tasmania, 1.0 per cent in the Northern Territory, and 2.1 per cent in the Australian Capital Territory.
“Let’s hope that the growing expectations about a forthcoming period of interest rate stability turn out to be warranted, as this could provide some optimism to would-be home buyers.”