The interest rate cutbacks imposed by the Reserve Bank of Australia (RBA) in the past two months seemed unable to convince Aussies to shop for new homes, bank executives said on Tuesday.
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At the peak of every bubble, the experts always claimed, “this time is different” and that the new situation bears little similarity to past disasters. Is this time truly different for Norway? We doubt it.
According to property research firm RP Data, home prices in the country's key cities shrunk by an average of 5.3 percent since last year yet there appears no significant rush among consumers to acquire properties.
Bankers reported that of the current month, the surge in home loans being anticipated by the market has yet to happen, with lenders only registering slight increase on their mortgage activities since the RBA started chopping down the country's borrowing cost in November last year.
During the stretch of the past seven months that the central bank had either pushed back or frozen the cash rate, purportedly to prompt for more growth and to spur consumer spending, Aussies did not react with too much excitement as shown earlier by the bleak data reported by the retail and housing sectors.
Simply put, there was no frenetic urge among consumers to part ways with their cash or to secure loans that would finance their property acquisitions, notwithstanding the attractive deals offered both by retailers and home developers, not to mention the downward adjustments in mortgage rates seen in the banking industry.
The element of confidence was just not present even as the RBA sheared off a total of 75 basis points from the official interest rates following its board meetings in May and June, according to Commonwealth Bank's executive general manager of third party banking Kathy Cummings.
Ms Cummings added that local consumers were just too wary to spend as host of worries, such as the unemployment condition, lulled their normal spending habits despite the cash rate reaching a low of 3.5 percent as of this month.
"Consumer confidence is the malaise that's affecting Australia, even though if you go overseas you come back and wonder what everyone is worrying about," the CBA executive was quoted by the Australian Associated Press (AAP) as saying on Tuesday.
For Adelaide Bank mortgage executive Damian Percy, the general trend seen lately seemed to suggest that "Australians have changed their attitude to debt," which he added has been observed since the last financial downturn in 2008.
Not only that consumer confidence has been down for the longest time, it appears too that the mindset among households is either to save up or repay debts, with spending occupying consumers' least of priorities, Mr Percy told AAP.
In a speech in Adelaide yesterday, RBA assistant governor Guy Debelle confirmed that sales in the housing has been declining and at levels comparable to the market condition 20 years ago.
Mr Debelle offered at the same time that the relaxed pace being observed in the housing market at the moment was due to Aussies opting to service their debts, taking advantage of the present condition by reducing their debt burdens while the interest rate is low.
He reiterated, however, that there was no supply glut currently seen in the sector but conceded that the moderate pace characterising the market may linger for some time.
"We don't expect credit going back to the pace it was in the mid-2000s, or household spending going back to that pace," Me Debelle was reported by The Herald Sun as saying in his speech.
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