The Housing Industry Association (HIA), the voice of Australia’s
residential building industry, says that the current low interest rate
environment will continue for the foreseeable future.
This prospect is reinforced by the fact that the headline rate of
inflation dropped to 1.7 per cent during the December 2014 quarter, the lowest
since mid-2012. The two key measures of underlying inflation were a little
higher, clocking in at a benign 2.2 per cent and 2.3 per cent respectively.
HIA Senior Economist Shane Garrett explains that the big drop in oil
prices over recent months is helping to curb cost of living pressures, adding
that fewer price pressures in the economy mean that a policy of very low
interest rates is both justified and necessary.
During the December 2014 quarter, the CPI sub-index relating to new
dwelling purchases by owner occupiers (excluding land) increased by 4.0 per
cent over the previous year. This compares with overall growth of 7.9 per cent
in established dwelling prices in the year to December. Consequently, new
housing costs are growing at half the rate of existing property.
Observing that land costs over the past year have been responsible for a
considerable part of dwelling price growth, Shane Garrett urges quick
resolution of issues around land supply and planning to improve housing