Not so hot?

It’s only a few weeks since RBA Governor Glenn Stevens came out on the morning show Sunrise to warn mums and dads that property prices wouldn’t go up forever, but it seems like there are signs that the white hot property market is already cooling slightly.

This morning’s figures from the Australian Bureau of Statistics showed loans to owner occupiers fell 1.8% in February seasonally adjusted, compared with the 1% fall predicted by most economists.

The value of owner-occupied housing finance fell 4.4% to $14.085 billion, while the value of investment housing fixed loans fell 1.1% to $6.402 billion.

It’s a sign that borrowers are starting to pull back from the market just a bit, probably as a result of higher interest and a sense that house prices might have just gone too far.

This news, along with suggestions that the banks are set to pull back a touch from the residential market by tightening loan criteria, will be very encouraging for Stevens.

While demand and supply issues will mean auction clearance rates will be strong for a long time to come, what Stevens wants to see is prices and, by extension, the amount of money people need to buy, fall slightly.

Not far enough to spook anybody, but to a level where even the suggestion of a bubble fades away.

The big question for Stevens and the RBA board will be whether he needs to raise rates even further to get their message across.

History suggests mortgage rates need to climb another 75-100 basis points to around 8% before consumer sentiment starts to slip and the wallets begin to close up.

A survey from eChoice this morning also suggests home buyers can take a bit more pain yet, with 49% of first-home buyers and 7% of existing homeowners saying rates still need to rise 2% or more before they will reconsider their purchasing intentions.

On this basis, we could be in for at least two and maybe three rate rises before the end of 2010.