Stimulus, rates ‘spur first home buyers’

First home buyers now comprise a record proportion of the residential housing market after responding to low interest rates and the government’s revamped assistance package, economists say.

First home buyers made up 27.5 per cent of all home loans in March, a record since the Australian Bureau of Statistics (ABS) began the data series in 1991, and compared with 26.5 per cent of the total market in February.

The ABS data also showed that the housing market has recovered to its February 2008 levels, when interest rates were still being raised by the Reserve Bank of Australia (RBA) before a series of monthly cuts since September to a 49-year low last month.

The number of home loans for owner-occupied housing jumped to a 13-month high of 59,793 in March.

The 4.9 per cent rise in March was even sunnier than economists’ forecasts of a 4.5 per cent increase.

“The housing industry is one of the more interest rate sensitive sectors and its a positive that the response has so far been rapid,” ICAP senior economist Adam Carr said.

“The result clearly ads weight to the argument that the Reserve Bank of Australia has done enough.

“It’s lost on many that other central banks around the world are cutting aggressively to counteract a breakdown in the transmission mechanism. This isn’t the case here.”

Between September and March, the central bank cut official interest rates by 400 basis points to 3.25 per cent in a bid to stimulate a flagging economy.

In early April, the RBA cut the cash rate by a further 25 basis points to a 49-year low of three per cent.

The ABS data found that total housing finance by value rose by 6.7 per cent in March, seasonally adjusted, to $20.688 billion, while loans to investors rose by 4.7 per cent from a year earlier.

“It’s particularly positive that investors are coming back into the market from low levels,” Mr Carr said.

Housing construction rose 13.9 per cent, or 5,565, year on year.

Lending for new dwellings climbed 2,610, or 8.8 per cent, while lending to buy established homes climbed 51,619, or 3.8 per cent, since March last year.

JP Morgan economist Helen Kevans said the boost to the federal government’s first home buyers grant has lifted demand for housing, particularly for new homes.

“As expected, demand for home loans again was underpinned by first home buyers, owing to the attractive grant and improved housing affordability, stemming from lower interest rates and falling house prices,” Ms Kevans said.

“The bigger grant for new building largely explains the solid 8.8 per cent rise in loans issued for the purchase of new dwellings in March.

“In coming months, we believe grants will continue to underpin demand for home loans, particularly during the June quarter given expectations that the expanded grant will end on June 30, as originally planned,” she said.

The government’s first $10.4 billion stimulus package, unveiled in October, doubled the first home buyer grant for established homes to $14,000, and tripled it to $21,000 for newly-constructed dwellings.

There is speculation the grant for brand new housing will be maintained in this year’s budget while the subsidy increase for established homes is scrapped.

Ms Kevans expects the RBA to cut the cash rate by 50 basis points to 2.5 per cent in the second half of 2009.

www.thewest.com.au

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Budget wish list – pensioners

Bet and Bob Poole, Coogee

Healthcare and getting by are key concerns for Bet and Bob Poole, who are war veteran pensioners courtesy of Bob’s service as a merchant marine in World War II.

The retired, married couple receives $957.80 a fortnight in pension payments from the Federal Government.

“We’ve been married for 62 years – you don’t get that for murder – and I’ve felt like murdering him a few times,” Bet quips.

“If we have a banana, we’ve got to share it, because we can’t afford two.

“Because you get about $75 extra each if you’re a single pensioner, we know a few of them who are living together and saying they’re separated, which is all well and good as long as you don’t get caught.”

Bet has a heart condition that needs four prescriptions costing $21.20 per month to treat. Bob relies on two prescriptions for another ailment, which cost him $10.60. The couple’s income includes a combined monthly rebate of $10 for prescriptions.
Bet and Bob say any decrease in their combined $11.20 prescription gap would be most welcome.

The couple has private health insurance, which they say they will have to surrender if Treasurer Wayne Swan cuts the 30 per cent private health insurance subsidy.

“If the Government wipes that 30 per cent, I won’t be able to be in it,” Bet says.

“Sooner or later, I am going to have to have my main (heart) valve replaced, and even if I have got private insurance that will cost thousands and thousands to replace.”

Bet says a push by the Pensioners’ League for an extra $30 per week income for single pensioners would not help her or Bob.

“We’re not going to get anything because we’re married, so if I divorce him, I’ll get $30,” she says.

Regardless, she resents that a pay rise for pensioners is even in question when federal politicians have just received one.

“They’re going to give themselves $90 per week and they’re trying to lower that $30 right down to nothing, and that stinks,” Bet says.

Electricity, gas and water prices are going through the roof.

“If we don’t get something in the budget, it means a lot of the pensioners are not going to eat.”

Bob says there should be greater health support for his former comrades injured in war.
www.watoday.com.au

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