While it took a bit longer than usual, the housing sector has responded just as it should to lower rates

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While it took a bit longer than usual, the housing sector has responded just as it should to lower rates. Lower interest rates led to improved housing affordability; which has led to increased home buyer demand (housing finance is up 23% year on year and new home sales are up 40% from their September 2012 low). Building approvals are now about as high as they ever get pointing to a construction boom on the way. Rising house prices and stronger housing construction are positive for retail sales. This is all good news as a stronger housing sector is critical if the economy is to rebalance away from mining investment. While a housing recovery is necessary to rebalance the economy, a concern is whether it's becoming another bubble. Australian housing is now overvalued and real house prices are 13% above their long term trend. (VIEW LINK)


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