Fed: Industry forms taskforce to battle housing crisis

AAP General News (Australia)
04-11-2007
Fed: Industry forms taskforce to battle housing crisis

By Colin Brinsden, Economics Correspondent

CANBERRA, April 11 AAP - The housing industry has formed a taskforce to confront a
growing crisis facing homebuyers and renters, a problem that can only get worse if interest
rates rise.

However, economic data released today gave a glimmer of hope that investors are returning
to the housing market, which may help soothe the severe shortage of rental property if
this trend continues.

The Housing Affordability Task Force has been formed by the Housing Industry Association
(HIA) and comprises leading industry figures from across Australia.

Announcing the taskforce, HIA managing director Ron Silberberg said today that a recent
report from the National Centre for Social and Economic Modelling (NATSEM) pointed to
an accommodation crisis the likes of which Australia had not experienced before.

"The report lays to rest any lingering beliefs the current dire situation is just part
of a natural cycle that will correct itself in a few years," Dr Silberberg said.

"It is systemic, part of an artificial situation created by restrictions on the supply
of land, excessive regulation, especially in the planning area, and attempts by governments
to squeeze every last dollar from the industry in taxes, fees and charges."

He said almost 550,000 households are currently in mortgage or rental stress, while
the number of households in rental stress is expected to increase by a further 106,000
before 2009-10.

"Our aim is to work with governments at all levels to find the answers and stop the
avalanche of regulation that has eroded housing affordability," he said.

"The time for posturing is past, we need a cooperative effort."

Still, the Australian Bureau of Statistics housing finance report for February released
today shows an 8.9 per cent seasonally adjusted jump in the value of loans taken out for
housing investment.

"Although the monthly data is volatile, the strong investment increase may be the first
sign that the supply side of the new housing market is reacting to the strong demand for
rental accommodation," said Joshua Williamson, senior strategist at TD Securities.

"Despite the attractiveness of the equity market, the first rise in rental yields in
a number of years should reawaken property as an investment class."

But overall, the data underpinned speculation that the central bank may be forced to
raise interest rates again, bad news for homebuyers who are already paying a record level
of interest repayments on their home loans.

Loan commitments for owner occupied housing grew for a third consecutive month, rising
by 0.3 per cent in February to 62,369.

Economists had expected housing finance commitments for owner occupiers to be flat.

"Following on from the surge in retail sales, jump in credit growth, and lofty levels
of consumer confidence, today's interest rate sensitive housing finance data continue
to suggest that households have adjusted remarkably well to the three rate hikes of 2006,"

said Su-Lin Ong, senior economist at Royal Bank of Canada.

Financial markets are betting on a near 60 per cent chance of another interest rate
rise next month.

Such talk kept the Australian dollar close to an overnight peak of 82.67 US cents,
its highest level in nearly 17 years.

Speaking in London yesterday, federal Treasurer Peter Costello said that a high dollar
is hurting exporters, but the government would not intervene to curb its rise.

AAP cb/sb/it/mn

KEYWORD: ECONOMY NIGHTLEAD

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