Australia Housing Approvals Drop to Lowest Since 2001

By Jacob Greber

Dec. 4 (Bloomberg) -- Australian home-building approvals dropped in October to the lowest level since 2001, adding to signs a contraction in the property market has worsened.

The number of permits granted to build or renovate houses and apartments fell 5.4 percent from September, when they declined a revised 5.9 percent, the Bureau of Statistics said in Sydney today. The median estimate of 21 economists surveyed by Bloomberg News was for no change.

Concern that the nation’s economy faces its first recession since 1991 prompted central bank Governor Glenn Stevens to cut the benchmark lending rate by 1 percentage point this week to a six-year low of 4.25 percent. House prices fell in the third quarter by the most since 1978, and lending by banks rose in October from a year earlier by the smallest amount since 1992.

“This is more doom and gloom,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “This is the one area that policy makers need to turn around in the next 12 months or we’ll see a deep recession.”

The Australian dollar traded at 64.76 U.S. cents at 12:14 p.m. in Sydney from 64.81 cents before the report was released. The two-year government bond yield dropped 2 basis points, or 0.02 percentage point, to 3.04 percent.

Approvals slumped 26 percent in October from a year earlier, today’s report said.

Interest Rates

Governor Stevens and his Reserve Bank of Australia board have cut the overnight cash rate target by 3 percentage points since September, the most aggressive round of rate reductions since the economy was last in a recession in 1991.

An index measuring the weighted average price for established houses in the nation’s eight capital cities dropped 1.8 percent in the third quarter from the previous three months, the Bureau of Statistics said on Nov. 3.

Australia’s economy grew 0.1 percent in the third quarter from the previous three months, the weakest pace in eight years, as household spending stalled, a report showed yesterday.

Demand for new homes may rebound in coming months after the government’s decision in October to triple to A$21,000 ($13,600) a grant to first-home buyers of newly built dwellings. Stevens said this week monetary policy is now “expansionary.”

Approvals to build private houses fell 2.7 percent to 7,507 in October. Approvals for apartments and renovations slumped 11.4 percent to 2,916, today’s report.

Today’s figures “point to a pretty weak fourth quarter as the economy continues to skirt dangerously close to a recession,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net