Australia | Jun 10 2009
By Chris Shaw
The Australian housing sector is again proving its resilience as housing finance figures for April showed a continuation of the gains posted in March with the number of owner occupier housing loans up by 0.9% for the month, or 1.1% in ex-refinancing terms.
First home owners continue to lead the way. ANZ Banking Group economist Alex Joiner notes the number of finance approvals in that sector of the market rose 3.6%, more than offsetting some consolidation among those upgrading their properties given that sector reported a 0.6% fall.
Also encouraging according to both Joiner and economists at Westpac is the fact investors appear to be re-entering the property market given investor finance increased by 8.9% for the month. Here some caution is required though in Joiner’s view as the increase has come without any jump in unemployment, which remains the big unknown with respect to how quickly investor interest will return to housing.
Commonwealth Bank economist James McIntyre suggests the recovery in investor lending is one of the final planks in the housing market story and this month’s data mean a 15% jump from the low point in February, though he points out to date investors have been focused on existing housing rather than looking to build new properties.
Looking forward Westpac suggests the numbers are encouraging for economic growth as with finance to owner-occupiers for new construction up 1.3% today’s data release implies higher new dwelling approval numbers are likely and this in turn suggests residential construction will add to growth in the second half of this year after being a drag in the current half.
McIntyre agrees, pointing out with monetary policy settings extremely stimulatory at present it is driving strong demand for new credit by households. Given this he suggests the Reserve Bank of Australia (RBA) is likely to keep interest rates on hold for the time being as the RBA remains aware of the risk of overly stimulatory policy leading to an increase in household gearing levels.
Joiner agrees the RBA will remain on hold in coming months given there have been enough positive data to suggest most of the work has been done with respect to lower interest rates. However, further data due out in coming days will also be important in his view, especially the labour force numbers out tomorrow. McIntyre shares this view, suggesting the RBA’s bias will remain towards lower rates given the potential for further adverse shocks to the Australian economy in coming months.