JavaScript disabled. Please enable JavaScript to use My News, My Clippings, My Comments and user settings.

If you have trouble accessing our login form below, you can go to our login page.

If you have trouble accessing our login form below, you can go to our login page.

Home sales sink to lowest since 1994

Video settings

Please Log in to update your video settings

Video will begin in 5 seconds.

Video settings

Please Log in to update your video settings

Will the RBA cut interest rates?

BusinessDay reporter Chris Zappone looks at the key factors influencing the Reserve Bank's decision on interest rates.

PT0M0S 620 349

New home sales have plunged to their lowest since May 1994 in the latest sign of Australia's struggling real estate sector.

Sales of new homes sank 9.4 per cent in March to 5443 homes nationwide, following a 3 per cent rise in February, according to the Housing Industry Association. Monthly sales were in excess of 7500 homes as recently as May.

Housing construction is at a low ebb as worries about the economy's health persist.

Housing construction is at a low ebb as worries about the economy's health persist. Photo: Glenn Hunt

“Leading housing indicators such as new home sales are pointing to on-going deterioration in already very weak new home building conditions," said HIA chief economist Dr Harley Dale. "That situation is in turn having a major negative impact on manufacturing and services sectors."

House sales fell 9.7 per cent in March, while unit sales slumped 6.9 per cent nationwide, HIA said.

In New South Wales, seasonally adjusted, new house sales tumbled by 9.7 per cent. In Victoria, they fell 4.6 per cent, while in Western Australia they dropped by 12 per cent. House sales sank 15.3 per cent in Queensland in March, the HIA said.

Australia's housing sector, while avoiding the sharp falls in value linked to the financial crisis elsewhere, is yet to recover even as the Reserve Bank cuts official interest rates with another cut expected tomorrow.

Home prices remain out of reach for many would-be buyers, while structural problems at local levels hinder construction of enough new homes to meet demand and keep the building industry expanding.

Home prices have retreated 4.4 per cent in the year to March, amid worries about the strength of the economy.

Fragile sentiment

Sentiment around existing housing has been fragile in recent months, as confidence has waned about the outlook for the economy at home and abroad.

Auction clearance rates in Melbourne - one barometer of demand for the health of the housing market - remained steady last weekend at 60 per cent, from a weekend earlier, according to the Real Estate Institute of Victoria.

In Sydney clearance rates fell to 48.8 per cent last weekend from 58.2 per cent a week earlier, according to Fairfax Media-owned Australian Property Monitors.

In other news out today, housing credit remained at its weakest level 35 years in March, part of a trend that is putting a lid on housing construction.

The Reserve Bank said that housing credit rose only 0.4 per cent in March, equalling its rise in February. However, over the year to March, housing credit grew only 5.3 per cent, the weakest since the data began in 1977.

In the current climate, households have switched to paying down debt rather than increasing their borrowing. Analysts forecast that future rate cuts may not have the same stimulatory effects as in previous cycles because of the increasing reluctance by households to take on more debt.

The market is currently tipping a 25 basis point cut to the Reserve Bank's cash rate as a near-certainty with a 30 per cent chance of a 50 basis point cut.

146 comments

  • In the other article, the REIV says things are picking up... I know who I believe.......

    Commenter
    shemp
    Location
    melb
    Date and time
    April 30, 2012, 11:20AM
    • REIV also getting more creative with their auction clearance rates completely hiding the number of "not reported" (i.e. failed auctions).

      Pretty soon they will be claiming 100% auction clearance rates with a total of 1 property sold.

      Commenter
      Freddy
      Date and time
      April 30, 2012, 11:56AM
    • Every housing crisis results in a property boom.

      New building has hit the bottom in 1994, property boom started 1995 and lasted till 2003.

      Commenter
      Michael
      Location
      Sydney
      Date and time
      April 30, 2012, 12:08PM
    • And to add further to the confusion - Gillard & Swan keep telling us how rosy our encomy is. Form your own opinions and stop listening to the maufactured spin both from the REIV & from the world's worst government.

      Commenter
      ian
      Date and time
      April 30, 2012, 12:52PM
    • Andrew Wilson saying prices are picking up & here is the real facts ... wow .. no wonder the comments to many of the property spruiking articles get closed so quickly.
      Ever wondered about that?
      Its good that prices are falling & demand is dropping.

      Commenter
      Yuppy
      Location
      Yuppy Ville
      Date and time
      April 30, 2012, 1:00PM
    • This may be the article
      http://theage.domain.com.au/real-estate-news/the-ups-and-downs-of-melbourne-prices-20120427-1xokk.html

      Commenter
      Jeff
      Date and time
      April 30, 2012, 1:42PM
    • Chris, the published data on The Age website has APM reported Melbourne clearance rate of 58%, not 60%.

      Commenter
      Chris
      Location
      Melbourne
      Date and time
      April 30, 2012, 1:56PM
    • Don't believe the REIV for a second, they have lost thier credibility years ago. the FACT is the Real Estate industry and all it's facets has been ROBBING the productive parts of the economy for years. This truley is the property bubble bursting that Australia needs.

      Like bursting a boil or pimple, it needs to be done in order for it to get better and heal.

      Commenter
      Tim
      Location
      Melbourne
      Date and time
      April 30, 2012, 2:09PM
  • Time to cut official AND mortgage interest rates. We got down to an RBA rate of 3% in 2009. We're headed there again.

    Commenter
    Michael
    Location
    Adelaide
    Date and time
    April 30, 2012, 11:23AM
    • Why? Houses are overpriced (between 20-40% depending on who you listen to) so we need this correction. Cutting interest rates to create a false boom on an already overinflated market doesn't make a lot of sense

      Commenter
      Mick
      Location
      Melb
      Date and time
      April 30, 2012, 12:28PM

More comments

Comments are now closed

Related Coverage

Will the RBA cut interest rates? (Thumbnail) Will the RBA cut interest rates?

BusinessDay reporter Chris Zappone looks at the key factors influencing the Reserve Bank's decision on interest rates.

Inflation slows, adding to rate cut chance

Australia's inflation slowed in April, giving the Reserve Bank yet more reason to cut interest rates when it meets tomorrow to decide on borrowing costs.

Property buyers turn their gaze to budget, interest rates

Property players will be watching as the Baillieu government unveils a difficult budget.

Housing credit at lowest level in 35 years

Housing credit remains at its weakest level in 35 years, as consumers worry about the direction of house prices.

Nation of loss-making landlords

The latest taxation statistics show that negatively geared properties are held mainly by lower-to-medium income and older age cohorts, posing a major risk to the housing market.

Home price fall adds to RBA focus

Australian home values fell last month, adding to pressure on the Reserve Bank to slash interest rates to rekindle demand in the sector.

Related Coverage





Featured advertisers

Special offers

Credit card, savings and loan rates by Mozo

Executive Style