Housing Market On The Way Up

Fresh evidence of a housing turnaround has emerged with a survey of the building industry pointing to a strong rise in activity, while the Real Estate Institute says housing has become more affordable in the past six months.

And analysts say a looming price war between the country's main home lenders should underpin the market further.

The Housing Industry Association's Builder Outlook survey of nearly 600 builders, taken last month, showed activity and employment fell sharply in all segments of the industry and in all states in the six months to March. The most noticeable falls were in the first home buyer market.

But expectations for the six months ahead have improved dramatically, according to the association.

Last December the ``net" balance of builders expecting an increase in sales and contracts over those expecting a decline was only one percentage point - 23 per cent of builders expecting activity to increase, compared with 22 per cent expecting a decline, and 55 per cent expecting no change.

In March the ``net" balance increased to 27 percentage points - 39 per cent expected a rise in orders while only 12 per cent expected a decline, with 49 per cent nominating no change.

Builders in Queensland and the ACT were the most optimistic.

South Australia and Victoria ranked next, followed by NSW and Western Australia. Tasmania was the only state where net expectations were for a further (small) decline.

On Friday, Bureau of Statistics figures suggested the housing downturn had bottomed with housing approvals jumping 9.5 per cent in February after a 7.4 per cent dip a month earlier.

Housing is also becoming more affordable, according to the Real Estate Institute. It found that in the December quarter there was a 3.3 per cent improvement in home loan affordability, which followed improvements in the September quarter.

But the December-quarter improvement was not as uniform as in the previous three months. Greater levels of affordability were achieved in Victoria, Queensland, South Australia and the ACT. Other states saw marginal declines.

Banking analysts believe the industry is poised for strong growth amid competition between lenders. The outbreak of fresh hostilities between the banks and the mortgage managers is likely to put a ceiling on any interest rate rises.

Market Faxts' economist, Mr Chris Gosselin, said borrowers would be the winners. Mr Gosselin said the battle between traditional home lenders and mortgage managers, such as Aussie Home Loans, ``is likely to result in a price war".

The Commonwealth Bank set the chain reaction off last Tuesday by announcing its profits would be slashed if home-lending margins were squeezed further. CBA estimates that $12 million will be knocked off its bottom line for every 10 basis points it loses in the margin on its variable-rate mortgage.

On Wednesday, St George Bank and National Australia Bank's subsidiary, Bank of New Zealand (Australia), launched competitively priced securitisable mortgages that attacked the mortgage managers head-on.

The following day, Aussie Home Loans said it had become one of the country's top four home lenders, knocking ANZ Bank back to the number five slot.

ANZ denied the claim.