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Australian Housing Industry Weakened in Q1 2008
Jul 25, 2008

The Australian housing industry experienced slow growth in Q1 2008 due to higher food and fuel prices, floods and economic uncertainty.

The Real Estate Institute of Australia said that the booming housing market of Australia is coming down as a decline in growth was registered in Q1 of 2008 in the capital cities, indicating weakening of the Australian housing market, as reported by Radio Australia.

The institute revealed that the house prices in Melbourne significantly dropped by over 8% closely followed by Sydney, Perth and Canberra. Perth was among the most badly hit markets in Q1 2008, recording a fall of 2.5%, while Canberra shrank by 6.8%. In the current fiscal year (2008-09), work was started on 154,130 new houses, slightly lower than 154,330 in the last fiscal. The recent mortgage-approval figures in the evaluation for built houses also experienced the biggest ever decline.

The primary reason for the decline in the Australian housing industry is the rising interest rates for home loans and other mortgage loans. Besides, consumers are uncertain whether to build their houses or to purchase owing to soaring prices of food and essential items due to inflation. Apart from these, the devastating flood in north Queensland at the start of this year is a hidden reason for decline in the Australian housing market.

At present, customers are taking several other factors into consideration before actually putting their hands on the trembling housing market. Moreover, customers are constantly being plagued with uncertainty over the country’s economy on account of the current credit crisis. The indeterminate financial circumstances are hitting prices of both homes and other constructions. The initial statistics presented for dwelling begins in the fiscal year 2007-08 together with the Q1 2008 that recorded losses owing to increased building costs.

Industry analysts hope that investors are also not ready to invest in the Australian housing sector because of the soaring mortgage rates. This is also lowering the housing demand in the country and preventing developers to commence fresh projects.

According to a Research Analyst at RNCOS, “The Australian economic prospects are not showing any positive signs, with remote possibilities of revival of home-building sector and business confidence declining to its lowest point. Therefore, the home construction companies in Australia should provide attractive and affordable financing policies and low mortgages to lure customers.”

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