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Rates Woes Prompt Housing Slump - What is Exactly Happening?

By: Paul Sharp

Most of people known that High interest rate caused a fall in housing sector. However, "how does rates woes prompt housing slump? What does international monetary fund say on rates woes prompt housing slump?" are known by less people. This article will give you a deep view of what is happening behine housing slump.

The interest rate increase has in turn caused a rapid fall in the housing sector. There is a home loan fall of around 7.9% which is a steep fall in past eight year’s time. With the increase in interest rates and the cost of living boost has become a burden for the common man. The Melbourne Institute index is at its lowest level, forcing consumers to reduce borrowing.

How does Rates woes prompt housing slump. It is also seen that the economy is slowing drastically; looking at the figures proves this fact. The Reserve Bank of Australia feels that the fall in the construction rates have been a boon as they will not be any need for them to increase rates.

Where else does Rates woes prompt housing slump. It is seen following the patterns of United States and Britain, Australia has also gone into housing recession leading to fall of housing sector. The reasons for this fall are increase in borrowing costs and slow economic growth which is leading to decrease in housing price fall for the past five years.

What does International Monetary Fund say on Rates woes prompt housing slump?

The International Monetary Fund has estimated the property market would slide by 30% by the year 2010. Since the Great Depression most of the Australian cities have experienced a slash in house price.

According to International Monetary Funds expert who feels Australian houses are overvalued by 25% in the year 2007 when it is compared with the household income. It was thought only Ireland, Britain and Netherlands were supposed to have a higher value for their houses, but the scenario has changed today.

Residex’s view on Rates woes prompt housing slump

It is felt that the data is highly irregular when compared with the data since 1865. Housing cost has fallen in cities like Melbourne, Sydney, Perth, Brisbane, Adelaide, Darwin, Hobart and Canberra by 0.6% to 2.2% according to Residex.

Rates woes prompt housing slump is a reality, the 100 year slide is seen in real estate and every aspect of housing industry has gone into negative. The debt in housing has grown twice since 1990 to 160% of the income, which is a lot more than Britain and the United States, says AMP Capital Investors. The median house price has increased by 140% during the period.

It is also felt that compared to Americans’ spending on property the Australian houses are very expensive. An Australian spends his six years of earning on property, whereas an American expends only half of that.

The growth rate is the same since 1991, whereas the Reserve Bank of Australia expected growth to move from 3.9% to 2.25%. The number of unsold homes is also going up and auction rates are falling. It is also seen that the period it takes to trade a properties has also gone up by 50%.

Article Source: http://indoarticles.com

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