The Reserve Bank of Australia blamed for driving house rents skyward as home building dives
12/01/2012 
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The Reserve Bank of Australia [RBA] is being blamed for a dive in housing construction, raising fears that rents are set to rise sky high due to a lack of residential rental housing accomodation in most Capital Cities and many regional areas.
The number of new housing plans approved by local councils dipped 2 per cent in December and is now 8.4 per cent below the peak reached in September.
With new home loans also weaker and inflation falling, the Reserve Bank of Australia board is considered certain to leave interest rates steady at its meeting in Sydney today.
However, there are concerns that the three rate rises last year have set the scene for trouble in the housing market.
ANZ senior economist Ange Montalti said the rate of housing approvals in December would translate to the completion of 137,700 homes if continued over a year. However, migration and the formation of new households means there is underlying demand for about 168,000 new homes a year.
“Housing market tightness is expected to intensify over 2007 as the supply of homes continues to run well below demand,” Mr Montalti said. He said this would generate higher house prices and rental levels, while vacancy rates would remain very low.
There had been hopes in the middle of last year that the worst was over for home builders, following several months of sustained growth. But rising interest rates had put new housing beyond the reach of many prospective buyers.
Housing Industry Association executive director Simon Tennent said: “The effect of three interest rate rises in seven months has capped a disappointing year for the new home building industry.”
Although consumers have become more reluctant to take on large mortgages, they are still spending in retail stores at a moderate rate. Christmas sales were 6.3 per cent ahead of the previous year, according to official December retail sales figures.
The rate of growth in retail sales has tapered off since early last year, with the monthly rate of increase falling from 0.7 per cent in February and March last year to 0.3 per cent in December.
However, all the retail industries except for restaurants have enjoyed growth of between 5 per cent and 7.5 per cent over the past year.
Making allowance for the seasonal peak, spending in restaurants fell in the last two months of the year.
The rise in retail sales last year mainly reflects people buying more goods, not just rising prices.
Source: The Australian
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Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers.
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