Housing slowdown 'not a crisis'
From: The Daily Telegraph
September 3, 2008
THE dilapidated housing industry will continue its slow demise despite yesterday's cut in interest rates, leading economists believe.
But ANZ chief economist Saul Eslake denied housing prices will fall rapidly, as is occurring in the US and Britain.
New figures released yesterday showed house building approvals fell for a third straight month in July, as demand continued to be throttled by the high interest rates.
Total building approvals fell by a seasonally-adjusted 2.3 per cent in July to 12,620 units, the Australian Bureau of Statistics said.
On an annualised basis, the figures are still well ahead of building approvals recorded in previous periods of high interest rates.
Figures obtained by The Daily Telegraph yesterday prove the current housing crisis is certainly not as bad as some of the market commentators have been suggesting.
On an underlying basis, housing approvals are running at an annualised rate of just under 150,000.
That is down from an annualised basis of 163,000 approvals in November last year, but is roughly where it was in the first half of last year.
At the bottom of the last housing crisis, the period following the introduction of the GST where interest rates were high, housing approvals were under 110,000, while in 1996 they dipped as low as 108,000.
Speaking to The Daily Telegraph yesterday, Mr Eslake said the downturn in the housing market should not be overplayed or even labelled as a crisis.
"These latest figures point to continuing softness in the housing sector, but it is not the same sort of downturn that has occurred during previous periods of high interest rates," he said.
"Housing has been slowing, but not collapsing and these figures are just consistent with that trend.
"Even in the worst affected areas, places like western Sydney, house prices are not falling like they are in the US or Britain and we won't see that unless there is a big rise in unemployment," he said.
Despite Mr Eslake's claims, Housing Industry Association chief economist Harley Dale said the Reserve Bank had failed to properly address the desperate need to attract investment to the housing sector, arguing that a rate cut of 50 basis points was warranted.
"A larger reduction in rates was required to ensure the massive shortfall in Australia's housing stock begins to turn around as soon as possible," Mr Dale said.
His sentiments were echoed by outgoing Lend Lease chief executive Greg Clarke, who said the cut to interest rates would not have a major effect on home buyers.
Mr Clarke also said the global credit crunch could continue for at least another 18 months and despite all that, Lend Lease was interested in acquiring aged care provider Babcock & Brown Communities.
Mr Clarke said the rate cut announced yesterday would not have a "pivotal" effect on home buyers.
"I think 25 basis points will help the psychology of potential house buyers but I don't see it as pivotal."