DEMAND IN PROPERTY HIGH

As stock levels are still very low, it comes as

no surprise that leading economists are all

saying the same thing, that new housing stock

is desperately needed.

In a speech given recently, Mr Stevens, the Reserve Bank governer agreed with others

that the fall in interest rates together with the extra grants for first-home buyers has

resulted in a large pick-up in demand for property. A very real challenge in the following

term is how to guarantee that the ready availability and low cost of housing finance is

translated into more houses and units, not just higher prices,' he said.

The scheme has also been extended until the end of September, and then it will start to

wind back ,halving from October until December. Glenn Stevens said in a major speech in

Sydney that property prices need to be kept under control and that means more supply

is required. He added that the global outlook had improved and emphasised the role of

business and consumer confidence in helping to lift the current economic conditions.

The low cost of finance available and a reduced supply of new housing in the market 

threatens to create a property bubble in Australia. In contrast to many other countries,

house prices are tending, if anything, to rise, and the rate of arrears on the majority

of mortgages remain very low by historical and international standards,' said Stevens.

If we fail to do that, if all we end up with is higher prices and not many more dwellings,

then it will be very disappointing, indeed quite disturbing,' Stevens said. The real estate

market in Australia has held up well during the current global economic downturn, which

economists have attributed to the government's increased first home owners grant,

amoung other things. Given the circumstances the economy moving to a position of less

than full employment, with labour shortages lessening and reduced pressure on prices

for raw material inputs, this ought to be the time when we can add to the dwelling stock

without a major run-up in prices,' he added. He also explained that the value of loan

approvals has risen by about a third since the low point in the middle of 2008, but it is

the upcoming months that will be crucial for the Australian market.

Locally there is still a strong number of buyers who are having difficulty with finance.

Most can get the finance from the bank, but are then having difficulty with mortgage

insurance. Many examples of small defaults of $50 and $70 from overlooked phone

accounts from 3 and 4 years ago is enough to stop the best applicant for finance.

Buyers really need to be in a strong financial position with no bad history at all.