Australia's housing market has slowed in recent months, as auction clearance results, new home loans and home prices slump, national official figures show.

The number of home loans approved fell 1.5 per cent in March, less than a revised 4.7 per cent drop in February, according to the Australian Bureau of Statistics. The market had forecast a 2 per cent gain for March.

ABS said total housing finance by value fell 0.1 per cent in March, seasonally adjusted, to $19.3 billion.

Recent rate rises and weak consumer confidence are threatening to derail Australia’s much needed housing recovery, according to peak building and construction organisation Master Builders Australia.

Mr Peter Jones, Chief Economist, said, “The negative trend evidenced in the housing finance numbers is not primarily due to weather events and has a lot to do with household caution in the wake of recent rate rises by the Reserve Bank.”

“Loans for construction of dwellings and purchase of new dwellings, combined, were flat in March as the residual impact of higher interest rates works against a recovery in residential building.”

“A positive sign was the pick up in dwellings financed by first home buyers, as was the increase in finance commitments for construction of dwellings for rent or resale by investors.”

According to him, the best possible interpretation of the housing finance numbers is that the decline suffered in 2009-10 has been arrested, but that the pace of recovery will be slow.

He said, “Still suffering from the credit squeeze and bank lending practices, it is critical for the interest rate sensitive residential building industry that there is an extended pause in Reserve Bank monetary policy.”

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