Melbourne's home market is losing steam after a stellar year.
Building approval figures released yesterday show trend growth in new house approvals sliding to 1.5 per cent per month in November from a peak of 3.8 per cent in March.
The wind-down coincides with the wind-down in the $14,000 First Home Owner Boost which expired in December and the Reserve Bank's three interest rate rises in October, November and December.
Only 1937 new houses were approved in Melbourne in November, down from 2544 in October.
Offsetting the decline in approvals for new houses was a rebound in approvals for apartments and continuing strong approvals for public buildings.
Nationwide approvals for apartments jumped 27 per cent in November after slipping 22 per cent in October. Approvals for public buildings jumped 29 per cent after jumping 19 per cent.
"The positive headline figure masks the fact that previous strength in the growth of new house approvals is now waning, and that volatility in other approvals is occurring around a disastrously low base," said Master Builders Association economist Peter Jones.
"Investor-driven building of units and apartments continues to be affected by the credit crunch with approvals running 40 per cent below the peak. A housing recovery is by no means a foregone conclusion, particularly as the First Home Owner Boost phases out."
Housing Industry Association economist Ben Phillips said apartment building remained weak.
"Low-rise units have been buoyed by the federal government's social housing stimulus package, but the medium to high density end of the market is yet to show signs of a sustained recovery," he said.
Sales of new homes by Victorian members of the Association slid 3.5 per cent in November after slipping each month since August.
The news is seemingly at odds with continued growth in house prices, with the RP Data so-called hedonic index of Melbourne values up an extraordinary 17 per cent in the 11 months to November.
Compiled from Valuer General's figures the hedonic index compares like-for-like sales such as contracts for the purchase of Footscray 3-bedroom houses with contracts for the purchase of Footscray 3-bedroom houses, and so is not influcenced by changes in the composition of houses sold from from month to month.
Melbourne values began climbing in January 2009 after sliding 5 per cent during 2008 in response to the global financial crisis.
ICAP Securities analyst Adam Carr remains optimistic saying all the conditions are in place for a "red hot" property market in 2010. "There's low interest rates, 100,000 jobs created in the last few months, and a housing shortage," he said.
Westpac is more cautious, its chief economist Bill Evans warning that the removal of the First Home Owner Boost and higher interest rates "will act to dampen momentum".
"That said, interest rates are only just into the neutral zone, the labour market is gaining momentum and investors are likely to return to the housing market after a slow response to date," he added.
Published in today's SMH and Age
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