Good news for borrowers, the Reserve Bank has left rates on hold at 4.75 per cent. The Governor says that growth in 2011, "is unlikely to be as strong as earlier forecast". Each quarter of a per cent interest rate rise adds another $60 to the monthly cost of the average Australian mortgage. With the official interest rate steady at 4.75 per cent, most mortgage holders are being charged a standard variable rate of 7.83 per cent by lenders.
Building approvals have hit a two year low. Dwelling approvals fell more than anticipated, with a 7.9 per cent fall in May. Approvals have now fallen 14.5 per cent this year. Building approval rates in Victoria and NSW fell significantly. Western Australia and South Australia posted modest gains. Weakness was concentrated in the volatile private sector units component falling just over 20 per cent – comprising of multi-unit apartment developments. The more stable seasonally adjusted estimate for private sector houses approved rose 0.7 per cent in May. Renovation approvals is trending higher at a 10 per cent annual pace, with Queensland activity after the floods a clear driver.
The Australian Industry Group Australian Performance of Construction Index in conjunction with the Housing Industry Association dropped 3.8 points in June to 35.8. It’s the thirteenth month in a row below the 50 threshold separating growth and contraction. HIA said potential interest rate rises and consumer caution have been subduing the market.
The Housing Industry Association’s report card has forecast a fall of 13 per cent in housing starts over the two year period from mid 2010 to mid 2012. On a more positive note the renovations segment of the housing market is forecast to grow 2.7 percent in the 2011 financial year.
Now to the Carbon Tax, HIA estimates it will increase the cost of the average new home by between $5000 and $6000 based on a $20 per tonne carbon price. More details to follow in the coming weeks.
