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The Real Estate Institute of Australia (REIA) president David Airey has said the Reserve Bank’s rate hiatus was “not long enough”, as fresh data emerges to show building approvals slumped in January.

According to Mr Airey, the combined rate increases in five months has the potential to dampen the market and stifle recovery.

Data from the Australia Bureau of Statistics showed building approvals dropped 7 per cent in January.

Private sector units and semi detached other dwellings were the hardest hit, with approvals down 29.1 per cent on the previous month.

The Housing Industry Association’s senior economist, Ben Phillips said units and semi detached dwellings were bearing the brunt of tight credit conditions – a problem that will be further exacerbated by higher interest rates.

“The poor start to 2010 should be a reminder that a housing recovery is not a given and that with government support, through the social housing initiative and the first home buyers boost, being fazed out or removed in 2010, interest rates will be a key factor in determining the fortunes of the home building industry,” Mr Phillips said.

“Adding further pressure to a broad-based housing recovery will be the ever-present supply side issues, such as the high cost of infrastructure charging at a state and local level and an approvals process that is overly constraining and time consuming.”

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