HIGHER interest rates, and a winding-down of government grants for new homes, have contributed to a contraction of housing finance, for the second successive month in November, 2009 (released January 2010).

Strong population growth, pent-up demand, and re-interest in real estate, by investors, is expected to result in the RBA increasing interest rates when it meets next month – making it an unprecedented fourth straight interest rate rise since late last year.

It's been speculated interest rates could rise between 1 and 3 per cent this year.

According to the recent ABS statistics, the number of housing finance approvals fell 5.6 per cent (seasonally adjusted) in November from October.

Victorian new home sales dropped by 9 per cent in May, following months of increased sales resulting from the boosted first home buyer grants.

Overall Victoria’s new home sale market is still performing impressively, with detached home sales increasing by 16 per cent over the three months to May 2009, according to the Housing Industry Association’s survey of the state’s largest builders.

 “Along with other leading indicators, the figures point to a healthy new home building market in Victoria in 2009,” said HIA Victorian Executive Director Gil King.