Residential home loans fall

The RBA is being urged to keep interest rates on hold when they meet again in August 2010, after housing commitments fell for the fourth time this year. According to the Australian Bureau of Statistics (ABS), the total value of home loan commitments fell by 0.3% in May 2010 after a brief recovery in April 2010.

The first home owner market suffered the greatest fall in commitments, accounting for just 16.1% of all dwellings financed – a drop of 0.2% from April 2010.

“We are seeing the cumulative effect of six increases in official interest rates between October last year and May this year,” Real Estate Institute of Australia (REIA) president Mr David Airey said.

According to Mr Airey, the RBA’s decision to pause rates in June was “long overdue”.

“The message for the RBA is abundantly clear”, he said.

HIA chief executive Graham Wolfe said the result was not just a product of interest rate increases, but upward price pressures sourced from tight credit availability, and obstacles related to land supply, planning, infrastructure charges and taxation.

“Impediments to a sustained housing recovery must be removed if we are to have any chance of supplying sufficient new housing to meet demand,” said Mr Wolfe.

“HIA estimates that the underlying demand for housing in 2010 is running at 190,000 dwellings per year. Yet, housing starts in 2010 are forecast to total only 165,940. This should be a signal to the Reserve Bank that steady rates are the appropriate course for the remainder of 2010,” he said.