Interest rate cut expected to boost housing

HOUSE builders are confident the Reserve Bank's latest 75-point interest rate cut will encourage buyers back into the depressed market.

HOUSE builders are confident the Reserve Bank's latest 75-point interest rate cut will encourage buyers back into the depressed market.

They expect first home buyers will be especially encouraged. 

But news of the rate cut came as more evidence emerged of a deep downturn in the US building industry, with James Hardie Industries yesterday becoming the latest Australian-listed operator to warn of tougher times ahead.

Lindsay Partridge, managing director of the country's biggest brick maker, Brickworks, said the rate cut to the lowest level in five years was "fantastic" news for the housing market.

"There is no better time for first-home buyers to enter the market and buy their first home now," Mr Partridge said.

"With interest rates down 2 per cent (to 5.25 per cent) since the onset of the global financial crisis and the Government's higher rebate for first-home buyers, housing has become more affordable for many young families."

Mark Chellew, managing director of cement and lime manufacturer Adelaide Brighton, said the cut was the much-needed stimulus the building industry was waiting for.

"In the long-term, it would provide an impetus for people to take out home loans and build homes," Mr Chellew said.

"It's especially good for first-home buyers to enter the housing market as long as they can keep their jobs. But developers will wait until February before deciding to increase building residential homes."

AV Jennings chief executive Louis Milkovits said the cut would spur people in the market looking to commit to a purchase.

He said that since the first cut in September -- of 25 basis points -- he had noticed an improvement in the stock clearance rate as mortgage rates fell from 16-year highs of 9.6 per cent.

But Mr Milkovits warned it would take a few more weeks before first-home buyers would decide to buy. The federal Government last month brought down a $1.5 billion housing stimulus package, tripling the first-home buyers grant.

Stockland Residential chief executive Denis Hickey said the latest cut was a positive move because it showed that the Reserve Bank was "on top of issues" concerning the economy.

Mr Hickey said the direct impact on home owners would be to relieve mortgage pressure, while it would give buyers certainty to purchase.

Westpac Bank's property team said house prices fell 1.8 per cent in the third quarter, with falls in every major capital city. While annual price growth remained positive at 2.8 per cent, Westpac said it was likely to turn negative in the fourth quarter as the credit crisis spread to the real economy.

Mr Partridge said that in the wake of the rate cut, Brickworks would review its stock levels and "consider restarting three brick kilns -- one in Queensland and two in NSW -- which have been out of action for the past year".

The company's brick plants are presently running at 70 per cent capacity.

James Hardie yesterday suspended production at two of its plants in the US because of the severe downturn in the US housing market.

Production at Fontana, California and Summerville in South Carolina has been mothballed, with the loss of 127 jobs. "The plant will reopen when market demand returns to acceptable levels," chief executive Louis Gries said.

Another building giant, Boral, has already mothballed 10 out of its 24 brick plants in the US.

"Our brick production is currently running around 38 per cent of our capacity, which is down from an average of 56 per cent in 2007-08," the company said.

Production at Boral's 14 concrete roof tiles plants in the US is running at 27 per cent, down from 48 per cent this time last year.