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Home building needs govt stimulus injection: economist
13/12/2011 - If the federal government is forced to offer fresh economic stimulus measures in the face of a troubled Europe, the housing industry believes it should be channelled its way as new data continued to point to a growing shortage of new homes. Colin Brinsden
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Financial markets strengthened in the wake of this weekend's European Union summit, believing some progress has been made to resolve the eurozone sovereign debt crisis with plans to tighten budgetary rules for the region's economies.
However, Europe's leaders failed to reach a consensus on a new treaty, while some analysts believe that not enough was achieved to stave off Standard & Poor's threat to downgrade ratings in the eurozone.
Against the uncertain backdrop, new data on Monday showed the value financing for the construction of new homes in October was $1.24 billion, its lowest amount since January 2009 and during the heat of the global financial crisis.
The number of loans for construction fell 1.7 per cent, the third decline in four months.
Housing Industry Association chief economist Harley Dale said for the foreseeable future the number of new homes for both owner-occupiers and renters will fall well short of requirements.
"Amidst the growing risk to our economy from the situation in Europe, now is the time to be providing stimulus to the new home building sector, while at the same time re-invigorating the housing supply reform process which currently lies dormant," Dr Dale said.
Still, the latest housing finance data from Australian Bureau of Statistics (ABS) precedes the two rounds of interest rate cuts in November and last week.
"Presumably home building will get a lift from the recent rate cut," Commonwealth Securities economist Savanth Sebastian said.
"But the current data is hardly positive for the home building industry. Population is rising but we aren't adding to the housing stock, suggesting that established home prices will soon flatten and then start edging higher again."
Overall, the data showed that the number of mortgages taken out grew by a stronger than expected 0.7 per cent in October to 51,831 loans.
Demand from first home buyers also perked up to 17.9 per cent of all loans taken up in the month, the largest proportion since January 2010.
Housing was also a key focus of the final report from the advisory panel on the economic potential of senior Australians.
Releasing the report on Monday, Treasurer Wayne Swan said the report recommended that federal, state and territory governments work in partnership with the housing industry to address the challenges of housing an ageing nation.
"It recommends that state and territory governments remove stamp duty to help improve housing supply and encourage more efficient use of housing stock, with the revenue replaced with more efficient taxes, such as annual land tax," Swan said in a statement.
Other ABS data showed the monthly international trade surplus narrowed to $1.6 billion in October from $2.2 billion in September.
Imports grew by two per cent in October from the previous month, but there was no growth in exports, and the total value of coal and iron ore to China fell.
"Overall, the data implies domestic demand is holding up," NAB Capital chief economist Rob Henderson said.
"But falling prices for exports is a sign of gathering storm clouds and the lower bulk commodity exports values to China is a worrying development."
Source: AAP NewsWire
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pat | 13/12/2011 17:45 1
Here's an idea. Stop building 4 bedroom 2 bathroom homes. What's wrong with the 3 bed 1 bath homes that previous generations started with. And forget landscaping, curtains, carpets,air conditioning etc. etc. etc. as a part of the finance packages. We dont need houses of the size that are being built, but he banks wont finance anything less, because they say it has no resale value. Between consumer and bank greed, we have priced Joe average and our children out of the market.
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