By Jacob Greber
May 5 (Bloomberg) -- Australian home-building approvals rose in March for a second month as government grants and interest-rate cuts spurred demand among first-time buyers.
The number of permits granted to build or renovate houses and apartments increased 3.5 percent from February, when they rose a revised 8 percent, the Bureau of Statistics said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg was for a 2.8 percent gain.
Central bank Governor Glenn Stevens will probably keep the benchmark interest rate at a 49-year low of 3 percent today to boost an economy that is in its first recession since 1991. The government is trying to avoid a U.S.-style collapse in property prices by handing out grants to buyers of new homes of as much as A$21,000 ($15,400). House prices fell by a record annual amount in the first quarter.
“We expect dwelling construction to add to growth,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. “That’s one sector of the economy that will be doing better over the next year or so.”
Building approvals fell 16.5 percent in March from a year earlier, today’s report showed. Economists tipped an 18.9 percent drop.
The Australian dollar traded at 73.98 U.S. cents at 11:53 a.m. in Sydney from 73.94 cents before the report was released. The two-year government bond yield was unchanged at 3.27 percent.
Rate Cuts
Stevens, who cut borrowing costs by a record 4.25 percentage points between early September and last month, will keep the overnight cash rate target unchanged at 2:30 p.m. today in Sydney, according to 18 of 19 economists surveyed by Bloomberg News. One expects a quarter-point cut.
The governor said on April 21 that while the economy is in a recession, there “remain good grounds to think that we will continue to weather the storm better than most.”
Rate cuts as well as government spending will “still be coming through for some time,” Stevens said.
Home-loan approvals rose for a fifth month in February and consumer confidence jumped in April by the most since August. Business sentiment gained in March for a second month.
Households with an average-sized mortgage of A$250,000 are paying A$7,000 a year less than they were six months ago, which is equal to 8 percent of average family incomes, according to the Reserve Bank.
Demand for new homes is being fueled by Prime Minister Kevin Rudd’s decision in October to triple a grant to buyers of new dwellings to A$21,000. He also doubled payments to buyers of existing homes to A$14,000.
Bank lending increased in March, helped by a 0.6 percent gain in mortgage borrowing, the Reserve Bank reported on April 30.
Approvals to build private houses rose 2.8 percent to 7,333 in March, today’s report showed. Approvals for apartments and renovations also advanced 2.8 percent to 2,840.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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