Housing squeeze tipped to tighten

 

Rebecca Hyam | ABC News | October 6, 2010 http://www.abc.net.au/news/stories/2010/10/06/3030897.htmA report into Australia’s housing industry has warned of a downturn in supply as federal stimulus measures fade.  The Housing Industry Association’s National Outlook says housing starts are forecast to fall by 4 per cent in the current financial year.The report says last year’s boost to the first home owner grant and lower interest rates helped drive a 26 per cent increase in the number of new homes built nationally.  But the HIA warns the country’s housing shortage is set to get worse because not enough homes are being built to match demand.  The report also found the stimulus measures prompted a short-term recovery in new home building and helped Australia avoid a recession. But the HIA says the Federal Government needs to examine tax reforms, an end to excessive regulation, increased land supply, and better competition in the banking sector to promote development.  HIA senior economist Andrew Harvey says the Government needs to lead the way in addressing a number of policy areas. “One of the main ones is removing stamp duty – it really is a very inefficient tax,” he said.  “Also things that block land supply, and the slow planning approval process is a major problem as well.”  Mr Harvey also wants a dedicated federal ministry for housing, because policy responsibility is currently spread across different portfolios. The Reserve Bank’s head of financial stability, Luci Ellis, says the housing market has cooled and growth in dwelling prices has tapered off in recent months.  She added that housing credit had also slowed and this was most notable for first-time homebuyers.  “Loans to property investor households have not surged the way they did during the more buoyant, rather speculative period in the early 2000s,” Ms Ellis said. Last week, RP Data-Rismark provided further evidence of a slowdown in pricing.  Rismark’s Capital City Home Value Index showed house prices fell 0.2 per cent from July to August.  Rismark managing director Christopher Joye says the market is likely to remain flat for the remainder of the year and may decline dramatically going ahead if the Reserve Bank raises interest rates. “If the resources boom combined with frisky consumer spending compel the RBA to lift the cash rate four to six times by the end of 2011, we would expect to see nominal dwelling values decline modestly,” Mr Joye said.