The RBA and building products company Brickworks claim there are signs that a recovery in Australia’s housing market is underway.
The RBA’s head of economic analysis, Anthony Richards, said deep interest rate cuts and the increase in the first home owner grant have had a “significant stimulatory effect” on the Australian housing market, leading to improvements in affordability and household cashflow.
“The fall in borrowing rates has reduced the debt servicing burden of the household sector by approximately 5% of household disposable income,” Richards said in a speech at the Annual Housing Congress in Sydney.
“In addition to the effect on the cashflows of those who are currently making mortgage payments, the reduction in interest rates improves the accessibility of home-ownership for potential homebuyers.”
Richards’s positive comments were echoed by Lindsay Partridge, chief executive of Brickworks. While he says conditions in the housing market have been terrible in recent months – compounded by the bushfires in Victoria and floods in Queensland, which further reduced construction activity – he is hoping February may have been the bottom.
Partridge says orders are now starting to pick up, and he expects housing construction data to improve in April and May thanks to the first home owner grant.
‘We’re only just seeing orders pick up now. By early May we’ll get a feel for it.”
HSBC economist John Edwards, who also addressed the Housing Congress yesterday, says there is scope for an upswing in housing, given Australia’s housing market had cooled well before the economy entered the depths of the downturn.
“I think housing is the key to how we cope with the global economic slump. Towards the end of this year we will begin to see an upswing in housing, and I think it will be quite important.”
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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