Housing caution creeps in

EXPENSIVE houses are proving hard to shift and
others are sitting on the market for months as interest rates climb.

Real Estate Institute of Tasmania president
Peter Bushby, who sells properties in Launceston, said houses priced at
$500,000 and more had "become a bit harder to sell".



"People have had to scale back when there is serious finance involved," he
said.



"There are fewer people stepping up to buy in the dearer market.



"People are considering whether they can afford that loan."



But Mr Bushby said the market was still strong with sales and median house
prices up in Tasmania compared with this time last year, although people were
more "cautious" and less inclined to buy on the spot.



A Housing Institute of Tasmania affordability report released this month said
housing affordability had hit a new low in the December 2007 quarter.



The report said the monthly loan repayment for a typical first-home mortgage
had increased $94 to $2689.



"Mortgage payments now account for 32.3 per cent of total first-home buyer
income, the highest proportion on record," it said.



REIT vice-president and Hobart agent John Soundy said the market had slowed
across the board.



"Properties are staying on the market longer and taking longer to sell," he
said.



"During the boom, 30 days was an average wait.



"It's out to 60-plus days now and it seems to me that it is still stretching
out."



Mr Soundy said good well-priced family homes and units were selling well but
agreed buyers were more cautious.



"Vendors are hanging out for their prices," he said.



"And I guess interest rates have had an effect."



Mr Bushby said each interest rate increase caused a "minor blip" when buyer
interest flattened for a couple of weeks.



"But people still need to put a roof over their head whether they are moving,
downsizing or need a bigger house because their family is expanding," he said.




Mortgage holders are staring down the barrel of further interest rate rises
after the central bank recently gave its bluntest warning yet on inflation.




In its quarterly statement this month, the Reserve Bank said there was a
considerable risk inflation would remain uncomfortably high until about 2010
unless domestic spending slowed substantially.



The grim warning comes after the latest rate rise early this month which took
the official cash rate to 7 per cent and its highest level since November
1996.



Economists now expect the cash rate to rise to 7.25 per cent next month and to
7.5 per cent in May.