Australia’s home loan approvals are up

Australian home-loan approvals increased in October for the first time in nine months after the central bank slashed borrowing costs to encourage property buyers back into the market.

The number of loans granted to build or buy homes and apartments rose 1.3 per cent to 48,299 from September, when they slid a revised 2.4 per cent, the statistics bureau said in Sydney yesterday. The median estimate of 21 economists surveyed by Bloomberg News was for a one per cent gain.

Households are being aided by the biggest round of interest rate cuts since the economy was last in a recession in 1991, and by expanded government grants for first-home buyers. House prices fell in the third quarter by the most since 1978 and the building industry shrank in November for a ninth month.

‘The number of first-home buyers should increase, in part owing to the expanded first-home owners’ grant,’ Stephen Walters, chief economist at JPMorgan Chase & Co in Sydney, said ahead of the report yesterday.

To restore consumer and business confidence battered by tumbling stock markets, central bank governor Glenn Stevens cut the overnight cash rate target by three percentage points since early September to a six-year low of 4.25 per cent.

Consumer sentiment gained 7.5 per cent in December, the second straight increase, Westpac Banking Corp reported yesterday.

The reduction in borrowing costs will provide ’significant’ support for the economy in 2009 amid the global slowdown, Mr Stevens said on Tuesday. ‘There is scope to do more with macroeconomic policy settings if needed,’ he added.

The Reserve Bank of Australia will reduce the rate by a further half-point when the board next meets on Feb 3, according to 16 of 21 economists surveyed by Bloomberg News.

Prime Minister Kevin Rudd, trying to stop Australia’s economy from slipping into its first recession in 17 years, tripled in October the government’s A$21,000 (S$20,829) grant to first-home buyers of newly built dwellings.

Prior to yesterday’s report, most indicators of Australia’s housing market showed that demand for homes and finance have slowed. Home-building approvals dropped in October to the lowest level since 2001, a report showed on Dec 4.

The total value of lending rose 1.9 per cent to A$17.4 billion in October, yesterday’s report showed.

Source : Business Times - 11 Dec 2008