Fed: Housing recovery levelling off as finance slows

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Fed: Housing recovery levelling off as finance slows

By Jim Hanna, Economics Correspondent

CANBERRA, Dec 10 AAP - The housing recovery appears to have plateaued although economistssaid today it would keep feeding economic growth until the middle of next year.

Home loans committed in October fell a seasonally adjusted 2.5 per cent to 52,365,the lowest level since May, the Australian Bureau of Statistics said.

Economists expected loans to rise by about three per cent, given the Reserve Bank cutinterest rates in September and October.

Finance for newly constructed homes edged up 1.6 per cent to 6,789 in October, 77 percent higher than they were 12 months ago at the bottom of the GST-induced building slump.

But finance for the purchase of newly-built homes dropped 12.3 per cent to 1,759.

The figures confirmed the sector was levelling out although this was expected giventhe pace of the recovery, BT Funds Management senior economist Chris Caton said.

"That said, given the very important role that housing has played in growth in overalleconomic activity in recent months, any topping out adds to concerns about growth in Australiaby mid-2002."

With little else expected to fill the growth void when the housing surge expired, anotherrate cut as early as February was a possibility, Dr Caton said.

HSBC senior economist Anthony Thompson said the six-month lag from finance approvalto dwelling completion would hold up building activity after construction finance peaked.

"We remain confident that dwelling construction will continue to add to GDP growthuntil at least mid-2002," he said.

Master Builders Australia said the October fall in home lending showed the housingrecovery would peak early next year.

MBA chief economist Wilhelm Harnisch said first home buyers remained a significantpart of the housing market, representing 24.9 per cent of all loans taken out in October.

But the Housing Industry Association said bureaucratic delays over the revised FirstHome Owners' Grant - which falls to $10,000 from $14,000 from January - could defer thestart of some new homes.

"It is crucial that if the housing momentum is to be maintained, the government mustact quickly in setting the changes in place," HIA executive director Ruth Morschel said.

Today's ABS figures also showed a sizeable shift by borrowers away from banks to non-banklenders.

Home lending commitments by non-banks rose 8.9 per cent in October to a record 12,902while bank home loans fell 5.7 per cent to 39,463, it said.

Banks' share of all home loans fell from 77.9 per cent in September to 75.3 per cent in October.

AAP jph/daw/hu/sb

KEYWORD: ECONOMY NIGHTLEAD