Australian home-loan approvals fell in December for a third month and the proportion to first-home buyers slumped to an eight-and-a-half year low as central bank interest-rate cuts failed to lure buyers into the market.
The number of loans granted to build or buy houses and apartments declined 1.5 percent from November, when they dropped a revised 0.7 percent, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 16 economists was for approvals to remain unchanged.
The Reserve Bank of Australia has reduced the overnight cash rate target six times since Nov. 1, 2011, to match a half-century low of 3 percent in a bid to spur hiring and revive the housing market. While that helped property prices rise last quarter by the most since June 2010, central bank data show housing credit growth in December dropped to the weakest annual pace since records began in 1977.
“The improvement in demand in the housing market looks quite tentative,” said Rob Henderson, chief markets economist at National Australia Bank Ltd., who predicted the 1.5 percent drop. “Still, there was improvement in lending for construction of dwellings. That’s important in terms of policy, because the RBA will be looking for signs the housing market improvement in prices is spreading out in terms of actual activity.”
The number of loans approved for home construction climbed 1.2 percent in December from a month earlier, today’s report showed, the first increase since July.
The central bank is trying to revive industries including construction to rebalance economic growth and extend 21 recession-free years as a resource investment boom is predicted to peak in 2013.
The Australian dollar was little changed after today’s data, buying $1.0316 at 12:51 p.m. in Sydney compared with $1.0321 prior to the release. Traders are pricing in a 51 percent chance the central bank will lower rates to a record 2.75 percent next month, swaps data compiled by Bloomberg show.
Today’s report showed first-home buyers made up 14.9 percent of the loans approved in December, the lowest proportion since June 2004. Still, first-time buyers’ average loan size climbed to a record A$293,900 in December.
The decline in first-home buyers reflects state government decisions to scrap aid, Henderson said.
“This is the problem with first-home buyers schemes: they bring forward consumption of new housing for people who otherwise might have waited and spread it over a period,” he said. “But then the demand is gone.”
Today’s report showed the total value of loans fell 2.6 percent to A$20.8 billion ($21.5 billion) in December.
The value of lending to owner-occupiers declined 2.7 percent, the report showed. The value of loans to investors who plan to rent or resell homes dropped 2.4 percent.
RBA Governor Glenn Stevens and his board in December cut the benchmark rate to 3 percent, matching the level set during the 2009 global recession. The RBA has lowered borrowing costs in six moves: 25 basis points apiece in November and December 2011, then 50 basis points in May, 25 in June, 25 in October and 25 this month. Still, the number of Australian construction jobs fell by 21,900 in the 12 months through November.
“The cumulative reduction in interest rates is affecting interest-sensitive parts of the economy, though the full effects will, of course, take more time to become apparent,” the central bank said in its quarterly monetary policy statement released Feb. 8.
Home-building approvals unexpectedly declined for the second time in three months in December. The number of permits granted to build or renovate houses and apartments fell 4.4 percent from November, the Bureau of Statistics said in Sydney last week.
Concern about job security in Australia has curbed retail spending, which fell in the final three months of 2012, the longest decline in 13 years. Consumer confidence was little changed last month as households concerned about their finances shrugged off rate reductions, a private report showed Jan. 16.