Australian May Home-Loan
Australian home-loan approvals probably rose in May as low unemployment and rising wages countered the effect of higher interest rates.
Approvals for loans to owner-occupiers to buy or build homes and apartments probably gained 0.8 percent from April, when they fell 0.5 percent, according to the median forecast of 18 economists in a Bloomberg News survey. The Australian Bureau of Statistics releases the report tomorrow at 11:30 a.m. in Sydney.
The Reserve Bank of Australia raised borrowing costs in May to stem inflation. That increase may not have stalled a rebound in the housing market, fueled by record wages growth and the lowest jobless rate in three decades. Most economists expect the central bank will raise interest rates again this year as growth picks up in the Asia- Pacific region’s fifth-largest economy.
“Households have seemed pretty resilient to the May rate increase,'’ said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. “The labor market is incredibly strong –you see vacancy signs everywhere at the moment — so people are confident they can service their debts.'’
Central bank Governor Ian Macfarlane, 60, who retires in September after 10 years as bank chief, raised the overnight cash rate target a quarter point to 5.75 percent on May 3, the highest in five years. He left the rate unchanged in June and July.
Fifteen of 25 economists surveyed by Bloomberg News on June 30 expect the bank will raise borrowing costs again this year.
Residential construction slowed last year, holding economic growth in 2005 to 2.5 percent, the weakest pace in four years.
This year, signs have emerged of a pickup in construction and lending.
Building Approvals
Home-building approvals jumped 3.3 percent in May from April, the government said on July 3, the third increase in five months.
Housing starts surged 10.6 percent in the three months to March 31 from the previous quarter, the government said on June 22.
Lending to consumers to buy houses climbed 1.2 percent in May from April, the central bank reported on June 30. Home lending was 13 percent higher than a year earlier.
Competition among home lenders has kept mortgage interest rates down, the central bank has said, which may lessen the impact of the May rate increase on household borrowing and the property market.
“Although the cash rate has been close to its historical average, interest rates paid by borrowers have been below average,'’ the central bank said in its quarterly statement on monetary policy on May 5.
“Households and borrowers have continued to find it attractive to borrow at prevailing rates.'’
A 30-year-low unemployment rate of 4.9 percent in May and wages growth of 4 percent in the first quarter from a year earlier have spurred consumer confidence and borrowing.
Bloomberg Survey
The Australian economy expanded 0.9 percent in the first quarter and 3.1 percent from a year earlier, the fastest pace in almost two years.
The annual inflation rate in the first quarter was 3 percent, at the top of the central bank’s target band of between 2 percent and 3 percent.
The following table shows economists’ expectations for the monthly change in the number of home-loan approvals granted to owner-occupiers in May
