THE recent quarter of a percent increase in interest rates by the Reserve Bank of Australia was an over reaction according to the Real Estate Institute of WA.
REIWA president Neville Fox said the RBA was overly concerned with the booming real estate market in the top end of Sydney and Melbourne, and souring stock prices for speculative Internet companies.
“However, much of Australia and most of the economy is not in boom conditions,” Mr Fox said.
“There is growing evidence that activity in the housing market reached a natural peak last November as the pre-GST home buying and building frenzy recedes.
Since then, there have been reduced levels of home sales and new home building.
“This slowdown in activity is happening in a relatively orderly fashion. However, the increase in interest rates could create an excessive slowdown in the housing market and in the wider economy.
“Consumers were already showing caution at the prospects of the GST and the likely impact of the new tax system.
“We are calling on the authorities to take a wait and see approach before attempting further interest rate changes.
“Let’s see how the economy handles the introduction of the GST and the passing of the Olympics,” he said.
Mr Fox said people should put pressure on banks to minimise increases in home loan rates.
“Home buyers should step up the competitive pressure on banks by shopping around for the best home loan deals,” Mr Fox said.
The Home Loan Affordability Indicator undertaken recently by Citibank and the Real Estate Institute of Australia showed the number of new home loans issued increased 10.2 per cent for the December quarter compared with the previous quarter.
The average value of a new home loan rose 2.2 per cent over the quarter as a result of an increase in families’ real wealth as incomes rose faster than the Perth Consumer Price Index.
Overall the WA HLAI fell 2.4 per cent over the quarter and 6.8 per cent for the year as a result of higher interest rates and increases in house prices of 5.2 per cent during 1999 to a median price of $149,000.
