Australian New Home Sales Fall; Rate Worries

Darlington Musarurwa
29 Mar, 2010
New York City

Reserve Bank of Australian Governor Glenn Stevens noted in an interview that interest rate should return to normal level and cautioned against those speculating in the housing market. Australia

[R]3:00 AM New York, 7:00 PM Sydney- Reserve Bank of Australian Governor Glenn Stevens noted in an interview that interest rate should return to normal level and cautioned against those speculating in the housing market. Australia’s new homes sales fell 5.2% in February. Macarthur Coal maintains sales forecast.[/R]

The benchmark stock index ended flat in Australia as investors locked in gains in financial stocks.

Commodity stocks were mixed as gold prices rose 0.2% to $1,107 per ounce and crude oil prices decreased 0.7% to $80 per barrel.

In Sydney trading ASX 200 Index edged up 0.01% or 0.4 to 4,897.30.

Of the ASX 200 index stocks, 107 advanced, 75 dropped, and 18 were unchanged. Challenger Financial led gainers in the index shares with a rise of 4.6% followed by Panoramic Resources gaining 4.4%.

The Australian dollar increased 0.5% to 90.86 U.S. cents.

RBA Cautions Interest Rates will Continue Rising

Reserve Bank of Australia Governor Glenn Stevens said in a televised interview on Seven Network today the country’s interest rates will continue to move towards a normal setting as the economy grows.

He noted that the normal level for the central bank’s cash rate will be determined by borrowing costs faced by consumers and businesses.

“Once the emergency has passed and things gradually look more normal then it''s not wise to leave interest rates right down at rock bottom any longer than we need to,” said Stevens.

Stevens also warned against a housing boom. He said that normal tendency of investors is to leverage in the housing market as a one way upward bet. He stressed that rates need to return to the “normal” level and “it is not going to be easy” for home investors.

He also said that home “prices are getting quite high” and I have children who will be ready to have their own property and you wonder “how is that going to be afforded.”

Australia’s New Home Sales Fall 5.2% in Feb

Housing Industry Association reported today that home sales fell 5.2% in February after rising 9.5% in January.

According to the HIA, declining home sales raise fresh concerns on the “sustainability of a recovery in residential construction in the face of rising interest rates and supply side barriers pushing households away from new homes towards existing property.”

Private sector detached house sales dropped by 4.7% in the review period and multi-unit sales declined by 9.4%.

Detached new home sales slipped 9% in New South Wales and fell 5.8% in Queensland, 7.9% in South Australia, and 5.1% in Western Australia. However, sales rose 16.1% in Victoria.

Housing affordability index published by the HIA declined 11.8% in the year to January.

HIA Chief Economist Dr Harley Dale said households are reluctant to enter the new home market as opposed to existing property because of land and labour shortages, frustrating planning delays, and the inequitable level of taxation and regulation on new housing.

Macarthur Coal Maintains Profit Forecast

Macarthur Coal today confirmed its full year coals sales forecast of 4.8 million tons to 5 million tons in fiscal 2010 after it lifted a force majeur declaration on shipments from Dalrymple Bay in North Queensland.


ASX Movers

Energy World Corporation Limited led decliners in the S&P ASX 200 index with a loss of 6.0% followed by losses in Linc Energy Ltd of 3.2%, in David Jones Limited of 3.1%, in CuDeco Limited 2.8% and in Gunns Limited 2.8%.

Challenger Financial Services Group Limited led gainers in the S&P ASX 200 index with a rise of 4.5% followed by gains in Panoramic Resources Limited 4.3%, in Virgin Blue Holdings Limited of 3.5% and in Carsales.com Ltd of 3.1%.

Other Movers

Avoca Resources Limited the gold explorer increased 2.3% to A$2.00.

BHP Billiton plc added 0.2% to A$43.38 after the mining company said its Kwinana nickel refinery in Western Australia restarted operations on March 26 after an 11-day unscheduled shutdown because of a hydrogen gas shortage.

Macarthur Coal Limited rose 2.9% to A$12.04 after the company resumes coal shipments and reaffirmed sales forecast.

Newcrest Mining Limited the gold producer climbed 1.0% to A$33.30.

Panoramic Resources Limited the nickel producer advanced 4.3% to A$2.39.

Santos Ltd decreased 0.8% to A$14.64 after the oil and gas producer was downgraded to “underperform” from “neutral” by analysts at Credit Suisse Group AG.

Seven Network Limited rose 1.4% to A$7.54 and the broadcaster is seeking new directors.