The number of loans granted to build or buy houses and apartments dropped 3.4 percent to 48,260 from February, when they declined a revised 2 percent, the statistics bureau said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg News was for a fall of 3 percent.
Slumping demand for housing finance adds to evidence that Governor Stevens’ decision to boost the benchmark interest rate six times in seven meetings is cooling domestic demand. Stevens said last week that borrowing costs are currently close to their “average” levels, stoking speculation policy makers will keep the key rate unchanged in coming months.
Borrowing has tumbled this year after Prime Minister Kevin Rudd’s government reduced grants to first-time buyers of newly built dwellings to A$7,000 ($6,300) from A$21,000 on Jan. 1.
First-home buyers accounted for 16.1 percent of dwellings that were financed in March, down from 18.1 percent in February and 27.4 percent in March 2009, the statistics bureau said today.
Stevens and his board increased Australia’s overnight cash rate target by a quarter percentage point to 4.5 percent last week, the third straight monthly move this year. The bank also boosted the rate every month in the fourth quarter.
As the risk of a serious economic contraction in Australia “passed some time ago,” policy makers have been adjusting the cash rate towards levels that “would be consistent with interest rates to borrowers being close to the average experience over the past decade or more,” Stevens said May 4.
Stevens also cited “buoyancy” in Australia’s housing market, where dwelling prices have surged 20 percent in the 12 months through March.
Prices surged last year after the central bank slashed borrowing costs to a half-century low to cushion the economy, which skirted the global recession in 2009. Employers added 19,600 jobs in March, keeping Australia’s unemployment rate at 5.3 percent, a report showed last month.
Gross domestic product growth will accelerate from 3.25 percent this year to 3.75 percent in 2011 and 4 percent in 2012, a pace that is higher than the economy’s “longer-run average rate,” the central bank said on May 7.
Three months earlier, the central bank predicted GDP would increase 3.5 percent in 2011. Its forecast for this year was unchanged.
The total value of loans fell 1.4 percent to A$20.2 billion in March, today’s report showed.
The value of lending to owner-occupiers declined 3.4 percent. The value of loans to investors who plan to rent or resell homes gained 3 percent.