By Jacob Greber
Jan. 14 (Bloomberg) -- Australian home-loan approvals rose in November, led by first-home buyers, after the central bank extended the biggest round of interest-rate cuts since the economy was last in a recession in 1991.
The number of loans granted to build or buy homes and apartments increased 1.3 percent to 49,192 from October, when they advanced a revised 1.4 percent, the statistics bureau said in Sydney today. The median estimate of 17 economists surveyed by Bloomberg was for a 1 percent gain.
The second month of rising home-loan approvals suggests the benchmark interest rate at a six-year low of 4.25 percent, plus increased government grants to first-time buyers, will stoke demand for housing this year. Central bank Governor Glenn Stevens cut borrowing costs last year by three percentage points after home prices fell in the third quarter by the most since 1978 and the economy expanded at the weakest pace in eight years.
“The jump in first-home-buyer activity is interesting because they benefit most from rate cuts and assistance” from the government, said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney.
“The housing sector won’t be a huge drag on the economy like in the U.S. and U.K.”
The number of loan approvals granted to first-home buyers surged to 23.6 percent of all house lending in November, the highest proportion since January 2002 and up from 19.5 percent in October.
Government Handout
To spur house building, which shows signs of stalling after home-construction approvals tumbled 35 percent in November from a year earlier, the government tripled a grant in October to first-time buyers of new homes to A$21,000 ($14,000).
Governor Stevens and his board said last month that monetary policy is now “expansionary” to stoke business and consumer confidence that has been battered by turmoil on global financial markets.
The Australian dollar traded at 66.87 U.S. cents at noon in Sydney from 66.84 cents before the report was released. The two- year government bond yield fell 1 basis point, or 0.01 percentage point, to 2.61 percent.
Investors have a 100 percent expectation the Reserve Bank of Australia will cut the overnight cash rate target by three quarters of a percentage point on Feb. 3, according to a Credit Suisse Group index based on swaps trading.
Job Losses
Slower economic growth and concern about rising unemployment may keep a lid on demand for home loans. Employers cut workers for a second month in December, driving up the jobless rate to 4.5 percent, the highest in almost two years, according to economists surveyed by Bloomberg News ahead a report tomorrow.
“If people don’t have a job or are uncertain about keeping a job, they are less likely to go out and buy a home,” said David de Garis, an economist at National Australia Bank Ltd. in Sydney. “That will be tested in the first half of the year.”
Lending to consumers and businesses rose at the slowest pace in six years in November, central bank figures published on Dec. 31 showed.
An index measuring the weighted average price for established homes 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.
The economy expanded 0.1 percent in the third quarter from the previous three months, the weakest pace since 2000.
The total value of lending fell 0.9 percent to A$17.5 billion in November, today’s report showed. Lending to owner- occupiers rose 1.4 percent, while the value of lending to investors who plan to rent or resell homes slipped 6.1 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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