Australian home-loan approvals fell in March for a sixth straight month after central bank Governor Glenn Stevens boosted borrowing costs and the government cut grants to first-time buyers.
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 housing finance approvals add 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.
“I still put it down to a dip after the stimulus-induced hump last year,” said Roland Randall, an analyst at TD Securities Ltd. in Singapore. “But we don’t expect to see negative growth in housing finance for much longer. We have a strong housing construction pipeline this year.”
The Australian dollar traded at 89.57 U.S. cents at 12:17 p.m. in Sydney from 89.56 cents just before the report was released. The two-year government bond yield fell 1 basis point to 4.76 percent. A basis point is 0.01 percentage point.
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.
Australia’s economic growth is forecast to double in the next two years to 4 percent, Treasurer Wayne Swan said yesterday in his annual budget.
Swan also said he aims to bring the budget to surplus three years ahead of forecast, in 2012-13.
As the risk of a serious economic contraction in Australia “passed some time ago,” policy makers have been adjusting the cash rate toward 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.