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New home sales show signs of stabilising - HIA

New research by HIA has revealed that new home sales appear to have stabilised in the first quarter of 2019.

A stabilisation in new home sales in the first quarter of 2019 indicates the credit squeeze may be beginning to ease, according to a Housing Industry Association Senior Economist.

The HIA released its New Home Sales report for March this week, showing a significant increase in growth for three of the five mainland states.

New South Wales (4.8 per cent), South Australia (8.6 per cent) and Western Australia (2.3 per cent) all experienced an increase in new home sales compared to the previous month, while Queensland experience a decrease of 4.7 per cent and Victoria was down by 2.9 per cent on the month of February.


HIA Senior Economist Geordan Murray said the figures reflected a market "adjusting to the new lending norms".

"After falling by 8.5 per cent in 2018 new home sales appear to have stabilised in the first quarter of 2019," he said.

"Given the rapid decline in new home sales throughout 2018, this moderation in the fall in new home sales suggests that the credit squeeze is easing.
"The credit squeeze impacted the market at a time when the natural housing cycle was already beginning to cool.

"Banks reduced the amount of money they were willing to lend and the time it took to get a loan approved blew out."

Lending will be in the spotlight this month as the Reserve Bank of Australia meets next week ahead of the Federal election on May 18.

Mr Murray said while there should be a clearer picture of the market's immediate future following the election, policies could dictate whether there is a rise in sales following the poll.

"There is uncertainty surrounding the federal election, which typically subdues new home sales and approvals as investors and owner occupiers put decisions on hold until after the election," he said.

"The election result will rectify this uncertainty but the potential for higher taxes on housing means a post-election rebound in sales may not eventuate," he said.


Speculation grows that RBA will deliver industry trifecta

With negative gearing safe and APRA's serviceability buffer set to be removed, the RBA could soon deliver a third boost to market sentiment.

eserve Bank of Australia Governor Philip Lowe has given a strong hint there may be a cut to the national cash rate next month.

The RBA decided to hold the rate at 1.5 per cent during its May meeting, marking 30 consecutive months since the last change.

In an address to the Australian Economic Society on Monday, Mr Lowe acknowledged ABS figures released last week showing that Australia's unemployment rate had risen slightly in April to 5.2 per cent, admitting that a lower cash rate would support employment growth.

Related Reading: 'Time to get on with it' - REIA President's blunt message following election

"The Reserve Bank Board recognises that monetary policy has a role to play here," he said.

"At (the RBA's May meeting), we discussed a scenario in which there was no further improvement in the labour market and the unemployment rate remained around the 5 per cent mark.

"In this scenario, we judged that inflation was likely to remain low relative to the target and that a decrease in the cash rate would likely be appropriate."

"Given this assessment, at our meeting in two weeks' time, we will consider the case for lower interest rates."

Mr Lowe's speech came on the same day that the Australian Prudential Regulation Authority wrote to banks, suggesting they remove the 7 per cent serviceability buffer on home loans, while also proposing serviceability assessments incorporate an interest rate buffer of 2.5 per cent.

According to Riskwise Property Research CEO Doron Peleg, the combination of a rate cut and the removal of the serviceability would be "a major boost" to the market.

"If there are no interest rate cuts, the increase in borrowing capacity will be around 4-5 per cent for investors and 9 per cent for owner-occupiers," he said.

"However, if the RBA cut rates twice, we will see an increase of around 9 per cent for investors and potentially 13-14 per cent for owner-occupiers.

"This will be a major boost to the market, especially as now the number one risk has been removed thanks to a Coalition win and the elimination of the threat of taxation changes to negative gearing and capital gains tax."



The Real Estate Institute of Australia (REIA) has welcomed the announcement of support for first home buyers through a First Home Loan Deposit Scheme.

REIA President Adrian Kelly said the scheme initially announced by the Government and supported by the Opposition will start on 1 January next year and assist first home buyers with their deposit.

"Under the proposal, first home owners will be able to buy their first home with a deposit of 5% compared to 20% which has become the industry norm post the Hayne Royal Commission," Kelly said.

"Not only will the scheme see first home buyers achieve their home ownership much earlier it will save them a considerable amount of around $10,000 by not having to pay lenders mortgage insurance.

"The scheme addresses two hurdles facing first home buyers &ndash the deposit gap and transaction costs which include mortgage insurance &ndash in a practical way.

"The last time the Federal Government introduced a special measure for first home buyers was the First Home Buyers Boost during the GFC.

"This measure saw first home buyers, as a percentage of total loans financed, increase from 20 in October 2008 to 31 in May 2009.

"With first home buyers currently representing just 17 of total housing loan approvals at the beginning of this year, the measure will be a timely boost not just for first home buyers but for the building sector and the economy in general.

"It is direct assistance like this rather than changes to negative gearing and capital gains tax which provide better outcomes for all."

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