Australia property market starts to slow

Three consecutive interest rate rises and the abolishment of the first-home buyers' grant have bought a halt to the Australia housing market boom, with sales of new and established Australian homes weakening considerably during the final weeks of 2009.

There was a 21.2% fall in applications for new mortgages in December, according to Australia's largest mortgage broker, Australian Finance Group (AFG).

Sales of new Australian houses and apartments in November by members of the Housing Industry Association were 10% lower than the peak of August.

AFG general manager Mark Hewitt said: “Three rate rises in a row was overkill for a vulnerable market, and the latest figures confirm our fears.”

Although December is traditionally a slow month for Australia property sales, Hewitt points out that residential property sales fell 8% year-on-year in December.

Treasury and the Reserve Bank were both hoping that the Australia property market would remain strong in order to support Australia's economic growth in 2010.

In the Treasury's mid-year budget update published in November it projected growth of Australia housing investment of 1.5% in 2009-10 and 12% in the next financial year.

However, the value of mortgage applications by first-home buyers is down by 71.9% from its peak in March.
First-home buyers accounted for just 13.1% of new loan applications in December, which was lower than expected.