 | The First Home Owners Boost and a rapid fall in interest rates have spurred on First Home Buyers.
The official cash rate has more than halved in 6 short months from 7.25% in August 2008 to 3.25% in February 2009 as the RBA struggles to keep Australia from plunging into debt fueled recession. Data released by the ABS show housing loan approvals for December is up 6.4% with the highest portion of First Home Buyers since 2001 contributing to this result. 25.4% of loans were taken out by First Home Owners, up from 23.6% the month previous. While the results do look positive, annual results show quite a slide. The number of loans is down 18.1 per cent for the year and the value of loans is down 11.4%. The rapid fall in cash rates have also fueled Real Estate spruikers into trying to encourage first home buyers into a life of excessively high debt. They now argue that mortgage repayments are almost as cheap as rent. While this is still a little stretch but none the less getting close, they have not factored in the effects of falling house prices. Between December 2007 and October 2008, the Perth medium house price fell 10% or $46,000 from $472,000 to $426,000. At falls of $4,600 a month that’s a lot of “free” rent money. Likewise between July 2008 and January 2009, the Melbourne medium house price fell 5% or $22,500 from $450,000 to $427,500. This works out to be falls of $3,750 a month. This could just prove to be a beginning of a suckers housing rally. Time will tell what effect unemployment will have on the huge debt levels required today to purchase basic housing. |
» 5609.0 – Housing Finance, Australia, Dec 2008 – The Australian Bureau of Statistics, 11th February 2009.
» Rate cuts boost home loan approvals – The Age, 11th February 2009.
» Housing lending shows policy impact – The Australian, 11th February 2009.
FYI, there was a good piece in the SMH today about foreign debt and the fact that this ever growing debt is what has created the property bubble and keeps it afloat
“Inflating house prices
Beavan believes that if all that debt were stripped away, irrespective of land shortages, property prices would be half to two-thirds of what they are today. ”If homebuyers don’t have money on loan from the banks, then they could not afford to pay the higher housing price – so the price would have to fall or the market would stagnate”.
”Why did we not index the rate of debt growth (15% per annum compounding for the last 12 years straight) to that of the country’s economic growth (less than 3% when the debt is stripped out)? Surely a lending system predicated on genuine national economic growth would be a far more practical solution?”
If governments had constrained debt growth, bank profits could not have kept growing at 15% a year. Or executive salaries at 30% for that matter. (Not to mention state stamp duty revenues.)”
http://business.smh.com.au/business/dont-mention-the-debt-20090219-8c6e.html