Master Builders Australia News

Rise in housing finance data does not remove need for further rate cut

Written by: Peter Jones, Chief Economist, 16 Jan 2012

Another rise in housing finance in November reflects a pick up in loans for the purchase of established dwellings and masks ongoing weakness in loans for construction and purchase of new dwellings, according to peak building and construction organisation Master Builders Australia.

Mr Peter Jones, Chief Economist, said, “The key finance indicator released today by the ABS shows that demand for new dwellings remains flat, despite indications of a pick up in commitments for the purchase of established dwellings.

Mr Jones said, “Loans for construction of dwellings and purchase of new dwellings, combined, were marginally up in November but remain well down on the same month a year ago.

He said, “The housing market is beginning to pick itself off the floor but the number of finance commitments remain weak by historical standards as consumer caution and Euro turmoil work against the upswing.

“The two recent rate cuts in November and December will help, but Master Builders believes the Reserve Bank still needs to do more to boost confidence and encourage a recovery in residential building.

“A sustained recovery in housing investment is critical because the residential market is underbuilding and undersupplied with the Government’s own Housing Supply Council estimating the shortfall in new housing at around 180,000 dwellings.”

“If the residential building industry remains in the doldrums, Australia’s housing shortage risks higher rents and prices as more people chase less stock.

“A solid residential building upturn should be an essential component of any broad-based, private sector-driven economic recovery in Australia.