'Tentative' housing recovery hasn't broken downtrend

by Adam Smith30 Jan 2012

Home buying may be showing some "tentative signs" of recovery, but an expected rise will not break the downward trend.

Westpac's forecast ahead of official ABS housing approval numbers due this week has called for a 2% rise for December. But the bank's chief economist, Bill Evans, does not believe this will break the downtrend seen through much of last year.

"December is still too early for an unambiguously positive response to rate cuts. Even in interest rate sensitive sectors like housing these usually take several months to impact," he said.

Evans suggested that "patchy sentiment" and consumer wariness woulld hamper any response to the RBA rate cuts in November and December. Even a massive 8.4% upturn in approvals for November left "a firm downtrend in place" for housing, Evans said.

"Overall, we expect a 2% rise in December, another positive but only enough to lessen - not break - the downtrend," he said.

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