This article is from the Australian Property Journal archive
THE Australian Property Institute's Victorian president Milton Cations yesterday condemned the decision by the Reserve Bank to raise interest rates again stating it would impact on ordinary Australians already struggling with their mortgages.
Cations said the rate rise creates an even greater burden for ordinary mums and dads who are facing bigger grocery bills, rising petrol prices and the costs of sending their children back to school.
“It also pushes potential home buyers further away from creating that so-called Australian dream.
“Housing affordability is already at critically low levels and the dampening effects on consumer confidence are percolating through the economy as a result of the credit crisis in the United States,” he continued.
Cations said the massive correction over the past month on the Australian Stock Exchange has impacted upon all Australians through their super fund investments.
“Now the Reserve Bank has assaulted the cornerstone of Australian wealth, the family home, and it is simply the wrong move at this time of the economic pendulum.
“It is simply the wrong time to be sinking the boots into the residential property market.” he concluded.
The Real Estate Institute’s president Noel Dyett said the decision is an increased burden for those already in debt and pain for would-be buyers, many of whom are already struggling.
He said the increase will add around $40 per month in average loan repayments.
“Over the past year, interest rate rises and increasing house prices have seen average loan repayments increase by approximately $260 per month.
“Renters will also be negatively affected by the latest increase, as property owners seek to recoup increased mortgage costs by raising rents. This is a growing area of concern. REIA property data shows that up to 27.8% of family income is used for rent in some cities, with the proportion increasing each quarter.” Dyett said.
HIA’s managing director Dr Ron Silberberg said increasing interest rates to quell consumer spending may actually have the opposite effect when it comes to housing.
According to the HIA, the housing sector represents nearly 30% of the total CPI and higher rents and house prices are feeding directly into inflation readings.
A HIA assessment of the private rental market shows that more than 550,000 households are in rental stress.
“Much of the CPI covers the necessities as distinct from discretionary items of expenditure.
“Because the Consumer Price Index seems to be driving monetary policy, it is overdue to review the structure and composition of the CPI, particularly the housing group,” Dr Silberberg added.
“Today’s rate rise will hurt those paying mortgages and rent. Higher interest rates will have only a very modest impact on those households without a mortgage,” he concluded.
Australian Property Journal
