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Interest rate cut spurs new home lending

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Australia saw a healthy rise in new home lending in June, rising by 2.3 per cent from the previous month and 6.3 per cent from the same month last year. Such a thing has been expected since the Reserve Bank cut the interest rate at the beginning of May.

According to the Australian Bureau of Statistics, the strongest growth in new home lending was in Victoria with an uptick of 19.1 per cent, followed by New South Wales with a growth of 10.8 per cent. However, figures fell in Western Australia by 20.7 per cent, the Northern Territory by 17.7 per cent, and Tasmania by 3.5 per cent.

Housing Industry Association senior economist Shane Garrett believes that prospective buyers just took advantage of the environment of lower interest rates.

“June was also dominated by the close federal election campaign which was the source of some uncertainty across the economy,” he said. “This data indicates that the benefits of lower interest rates trumped any reluctance by buyers to enter the market during the tight election race. It’s, therefore, likely that the interest rate cut will help bolster activity on the new home building side.”

HIA’s New Home Sales Report also showed that the total new home sales over the year to June 2016 bounced back by 8.2 per cent, highlighting the resilience of the national new home building sector.

“The overall profile of HIA new home sales is signaling an orderly correction to national new home construction in the short term, as are other leading house indicators,” said HIA chief economist, Harley Dale. “Below the national surface, the large geographical divergences between state housing markets have been a prominent feature of the current cycle and that will continue.”

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