Are bumpy times ahead for Australia’s housing market?

Australia’s housing market is showing signs of weakness for the first time in several months, with new figures pointing to a lift in mortgage defaults and a dive in new housing finance.

The value of loans for new houses and apartments dropped by 7.4% or $1.25 billion in July, while the number of new loans decreased 4.1%.

Although the causes of the decline are unclear, the first signs that US sub-prime woes could have a serious impact on international financial markets came at the end of July.

A withdrawal from the larger than usual level of borrowing in June in order to meet the 30 June special superannuation contribution deadline could also explain the July drop, ANZ economist Paul Braddick says.

Also disturbing are figures showing mortgage defaults in western Sydney reached a record high in June. According to the data, released by Labor shadow assistant treasurer Chris Bowen and reported in The Australian, a record 364 homes were repossessed in Sydney’s vulnerable western suburbs in June.

If the trend continues, Bowen says, there will be 4000 repossessions in western Sydney in 2007, up from 3642 in 2006 and 2357 in 2005.