Fears rise over possible downturn in Australian property market

Published:  19 Feb at 6 PM
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Figures recently released by the Australian Bureau of Statistics are stoking fears that the country’s property boom in on its way to a bust.

Working on the premise that real estate developers know exactly when to pull in their financial horns, speculators are nervous due to the noticeable fall in the value of building approvals over the last three months. Tasmania saw the biggest drop at 22 per cent, with Victoria coming in at 12 per cent.

The falls are patchy, as slight improvements were seen in Queensland, Western Australia and South Australia, but news from the Housing Industry Association that their members are having a tough time meeting the new lending criteria isn’t helping. According to an economist with the association, the new-build sector is facing excessive taxation, annoying regulations and far tighter credit conditions.

He added that last year’s recovery in new home approvals has faded into history and feels the government needs to introduce market stimulus policies. At the same time, home loan approvals, formerly at an all time high, dropped by 1.5 per cent last December.

In spite of the Reserve Bank of Australia’s cutting of interest rates four times in 2012, there seems to be no measurable improvement in the housing sector. JP Morgan economist Ben Jarman states the rate cuts haven’t brought borrowers back, with the economy in need of new home purchases rather than sales and purchases of existing stock which only drive market prices higher.
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