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Rate rise won’t hurt housing demand

04 November 2009 Reporter

The Reserve Bank’s decision to raise rates for the second consecutive month should not make a large material difference to housing demand, the Housing Industry Association (HIA) has claimed.

According to HIA’s chief economist Harley Dale, figures show that sentiment towards buying new homes begins to falter when mortgage rates hit their 10 year average of 7.25 per cent.

Even with the latest rate rise, the variable rate on the average mortgage is still significantly below that mark, he said.

Similarly, the strength of the underlying demand stemming from the shortage of housing plus ongoing population growth means the sector should be able to absorb another rate rise.

“It is widely regarded that rates will rise moderately over the next six to nine months and that’s at a time when we don’t have a lot of evidence of new home building recovery and nothing of the magnitude needed to bridge the housing gap,” Mr Dale said.

Michael Brock from the Real Estate Institute of South Australia agrees the 25 basis point increase by the Reserve Bank should not hurt property prices or demand.

"I think the buyers in the market had already anticipated a quarter of a per cent," Mr Brock said.

Rate rise won’t hurt housing demand
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