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ISCOVER
Steven Cross
Home buyers aren’t taking the low cash rate bait, from fear of taking on more debt.
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The budget, released last night, noted that the investment property market was going through a rough patch, despite large scale slashes from the Reserve Banks cash rate.
“The outlook for dwelling investment is subdued, reflecting weak demand (due in part to households’ cautious attitude towards taking on new debt, notwithstanding the prospect of lower mortgage interest rates) and ongoing supply constraints in some areas,” the budget paper read.
The paper said that growth from the last three years had been due to Victoria’s strong growth in the new housing market.
“But that market is now returning to more normal levels of activity, while demand in other markets is expected to remain weak.
“Outside Victoria, ongoing supply constraints associated with state and local planning and approval processes, as well as high costs of development and land release restrictions are also expected to continue to restrain dwelling investment growth.”
The Treasurer has forecasted no relief to the “deterioration” of the market because of declining approval rates.
“Dwelling investment is expected to contract by 1 per cent in 2011-12… with dwelling approvals and commencements both declining in 2011, also led by Victoria.”
However, according to the Government, the future looks bright.
“Dwelling investment is forecast to be flat in 2012-13 before recovering a little in 2013-14.”
