Housing approvals in crisis

HOUSING approvals figures released for the period to June have indicated a deep slump that was a lot worse than had been forecast.

The decline in the five months to June was about 35 per cent. Private sector home approvals fell 42 per cent between December 1999 and June 2000.

The reason for the fall was said to be a combination of the interest rate rises during the past six months and the artificial boom as builders tried to get their projects completed before the GST.

Whatever the reasons for the decline, the undeniable fact is that the housing industry is in a serious condition as far as demand and approvals are concerned.

The industry has certainly savaged the Reserve Bank over the latest rate rise.

Master Builders Australia chief economist and deputy national executive officer Wilhelm Harnisch said the rate rise could “devastate” the industry.

He was also concerned about the likelihood of another rise next month.

“A further rate rise should be off the agenda,’’ Mr Harnisch aid.

“Otherwise, the impact on the housing industry, particularly in the area of jobs, will be severe.”

The rise was described as a “overkill” by Real Estate Institute of Western Australia president Neville Fox.

Mr Fox said the increase would affect families with home loans on tight budgets and the price of houses in the short term.

“Owners of properties for sale should be realistic and factor in the impact of the latest rate rise on home buyers when assessing the expected sale price of their properties,” he said.

There is little on the horizon that would suggest that there is any salvation for the industry.

The first homebuyers’ grant that has been in place since July 1 does not appear, anecdotally, to have done much for the stimulation of the market.

The impact of the grant was always seen to be at its most effective at the lower end of the housing market.

The expected increase in the price of housing, as a result of the GST, was estimated to be about 7-8 per cent .

For a house valued at about $100,000, the $7000 grant would offset the price rise fully.

However, at any price above that level, the grant would have been insufficient to cover the rise.

So, at best, the grant would have offset the price increase at the lower end of the market.

The anecdotal evidence so far suggests that real estate agents have experienced a fairly depressed start to the year.

Sales figures are not as strong as they have been in the past. The period leading to the June 30 period was a particularly tough one for agents, with listings and sales down


Figures in May were quite poor and the June figures were, in the words of one agency group, “the worst we have seen for quite a while”.

This view was echoed by other agencies which, while not suggesting that the downturn was going to be sustained, felt that it certainly was one that had been experienced by the industry.

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