30 December 2011
This morning’s Reserve Bank Financial Aggregates showed housing credit up 0.5 per cent over November 2011, data which is consistent with RP Data-Rismark’s monthly Home Value Index for November. The 0.1 per cent increase in house prices coupled with the increase in credit indicates that more borrowers and buyers are responding to the RBA’s November interest rates cuts and could be a sign of further strengthening in the housing market moving into 2012. Housing credit rose by 5.7 per cent year on year to November.
According to Yellow Brick Road Executive Chairman Mark Bouris, “Whilst credit is rising, it’s coming up at a lower than normal rate when compared to historical data. This tells us that housing credit extended to buyers is down significantly, so the RBA will be looking to increase that level with rate reductions in the near future.”
Yellow Brick Road believes that the stabilisation in Australian house prices in November is an encouraging sign and it signals that the market may see even healthier activity with the benefit of two full rate cuts behind borrowers. Bouris predicts there will be another three rate cuts in the coming months, however, he believes the decision to reduce rates further will lie in the CPI figures for the December quarter, due out 25 January 2012.
“The RBA made a timely decision with the first two rate cuts but they will have to follow them up with additional support in order to give the market the boost it needs,” says Bouris. “Yellow Brick Road has long held the view that the housing market would recover more quickly than many economists claimed and while actual house prices have fallen by 2.8% in 2011 including gross rents, total returns are actually up 1.2%, according to RP Data-Rismark. The only better performing asset-class during 2011 has been Australian cash and fixed-income."
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