Building Slump Will End Soon - Citibank

Canberra.

The housing slump could finally end early next year, but the subsequent upturn was likely to be modest, a leading financial institution has predicted.

According to Citibank's latest housing-finance indicator, the sharp slump in home lending over the past year is not over, despite recent signs of improvement.

It said lending was likely to bottom out during the first three months of 1996 because of a gradual reduction in the oversupply of housing, a rebound in economic activity and a recovery in the underlying demand for housing.

Citibank's senior economist, Mr Stephen Koukoulas, said the recent improvement in home lending had been a ``false dawn" based on steady mortgage rates and competitive marketing by banks and other financial institutions.

The housing sector still had to go through further adjustments to the oversupply and the stalling in the job market, Mr Koukoulas said.

Citibank's forecasts show that the number of home loans should reach a trough of less than 79,000 during the March quarter next year. But the pace of recovery will be gradual, with lending by early 1997 still likely to be below the level of a year earlier.

The Victorian outlook is relatively positive, along with New South Wales, South Australia and the Northern Territory, while Queensland, Western Australia, Tasmania and the ACT are still looking at gloomy housing prospects next year.