A slightly different angle on the previous story. Cracks are clearly emerging. As I said, December quarter was the turning point. If investors get the jitters, the catalyst for the crash sets in.
- 'Like a cold bath for the market' - Mortgage applications drop 21pc - First home buyers dry up
THE Reserve Bank's three consecutive rate rises and the winding down of the first-home buyers' grant have knocked the stuffing out of the housing market, with sales of new and established homes weak at the end of the year.
There was a 21.2 per cent fall in applications for new mortgages in December, according to Australia's biggest mortgage broker, Australian Finance Group.
Sales of new houses and apartments in November by members of the Housing Industry Association were 10 per cent below the peak touched in August, reports The Australian.
"Three rate rises in a row was overkill for a vulnerable market, and the latest figures confirm our fears," AFG general manager Mark Hewitt said yesterday.
Mr Hewitt said December was traditionally a slow month for housing sales, but the latest fall compared with a drop of 8 per cent in December last year.
Treasury and the Reserve Bank were both counting on a strong boost to housing investment to support Australia's economic growth in 2010.
However, the value of mortgage applications by first-home buyers is down by 71.9 per cent from its peak in March.
First-home buyers accounted for only 13.1 per cent of new loan applications in December, whereas nine months previously they were at 28.1 per cent.
Mr Hewitt said the fall in sales of established homes to first- home buyers had a knock-on effect as the vendors typically trade up to another house.
Over the last three months of 2009, new mortgages for first- home buyers fell by 39.0 per cent, while sales to established home owners were down by 19.1 per cent.
Demand from investors has held up better, slipping only 3 per cent.
The Housing Industry Association's latest sales figures show that sales in November were marginally (0.3 per cent) ahead of the October result, but were still well below levels achieved earlier last year.
"The loss of momentum in recent months reflects investor and upgrade owner-occupier sales activity failing to fill the considerable void left by the winding down of first-time, buyer-related activity," the survey reported.
Chris Richardson, the director of Access Economics, said that the housing sector was looking like overheating late last year and needed to cool down.
"This was always a sector that was always going to be taking a cold bath as stimulus was withdrawn," he said.
