{"id":54573,"date":"2008-08-14T12:50:07","date_gmt":"2008-08-14T02:50:07","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2008\/08\/14\/can-rate-cuts-rescue-the-oz-housing-market\/"},"modified":"2008-08-14T12:50:07","modified_gmt":"2008-08-14T02:50:07","slug":"can-rate-cuts-rescue-the-oz-housing-market","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2008\/08\/14\/can-rate-cuts-rescue-the-oz-housing-market\/","title":{"rendered":"Can Rate Cuts Rescue The Oz Housing Market?"},"content":{"rendered":"

By Andrew Nelson<\/p>\n

Few will argue that the sharp rise in mortgage interest rates has helped cause a slowdown in the Australian housing market. Housing finance approvals have slumped 27% in five months, seeing house prices slip and dwelling construction track sideways.<\/p>\n

Westpac Senior Economist Matthew Hassan points out that the 160bp rise in floating mortgage rates since August 2007 has taken them to 9.6%, a 16yr high and an unambiguously “tight” level.<\/p>\n

The  result has been a worsening shortage of housing, with pent-up demand estimated to be running at over 130k dwellings and rising, seeing vacancy rates drop to historical lows, and causing rents to skyrocket.<\/p>\n

However, with discussion of rate cuts coming from the RBA, Hassan reasons that the substantial pent-up demand for dwellings could mean an upturn may be able to regain traction without rates dropping all the way down to neutral levels (ordinarily around 6.75-7.25%) or lower.<\/p>\n

But “what reduction would stabilise the housing market?”, asks Hassan.<\/p>\n

He says it would take at least 100-150bps in rate cuts, taking mortgage interest rates to around 8%. This would probably be enough to see a renewed upswing in construction gain traction, all else being equal. He cites the 2007 market as evidence, when an upswing gained traction despite mortgage rates being at 8.1%, which was significantly higher than neutral levels.<\/p>\n

Those level, he says, were driven by pent-up demand.<\/p>\n

However, Hassan warns that anything over 150bps would risk generating a renewed upturn prices, which the RBA would be keen to avoid.<\/p>\n

\"\"<\/p>\n","protected":false},"excerpt":{"rendered":"

Westpac says 100-150bp in rate cuts could stop the slide in the housing market.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54573"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=54573"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54573\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=54573"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=54573"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=54573"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}