New homes in demand despite rate rises

(AAP) - East coast borrowers are still hungry for new homes despite recent interest rate rises and the roll back of the first home buyers scheme, a survey shows.

The Australian Property Institute's property directions survey found 94 per cent of
respondents in Sydney, Melbourne and Brisbane believe interest rates will be higher
over the next 12 months.
But all three residential property markets are expected to be in upswing and not
peak until after 2012.
"The overwhelming majority of respondents believe interest rates will be higher in
12 months time," API NSW President Robert Hecek said in a statement on Tuesday.
"Despite this, they are still anticipating the residential property market will
continue on an upswing."
Mr Hecek said a number of factors had bolstered the residential property market
during the economic slowdown, including government stimulus and a series of interest
rate cuts in late 2008 and early 2009.
"As the stimulus has been withdrawn and interest rates have increased, we have seen
demand for housing stay strong due to issues such as a shortfall in supply," Mr
Hecek said.
Mr Hecek said the reduction of the First Home Owners Boost, from $10,500 to $7000 on
December 31, did not have as great an impact as expected on the residential property
market.
The survey found that 38 per cent of respondents believe withdrawing the stimulus
has had little impact on residential properties priced below $500,000.
This compares to API's September survey, in which 70 per cent of respondents felt
the withdrawal of this stimulus would have a significant impact on residential
property.
The Reserve Bank of Australia (RBA) rapidly cut the interest rate from 7.25 per cent
to three per cent between September 2008 and April 2009.
It has since lifted the cash rate five times since October last year to its current
4.25 per cent.