Home loans rose more than expected in August, showing the impact of earlier rate cuts bolstering activity in the housing sector.
Home loans increased 1.8 per cent in August, following a 1 per cent fall in July, according the Australian Bureau of Statistics. Economists had expected a rise of 1.5 per cent in the month, as the effects of earlier rate cuts filtered into the economy.
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Home loans increase in August
BusinessDay's Chris Zappone examines the latest housing market data from the Australian Bureau of Statistics.
4Cast Ltd economist Celeste Tay said better housing affordability linked to lower mortgage rates appeared to be supporting demand for home loans, which have in turn lifted auction clearance rates.
‘‘We expect an additional 50 basis points worth of cuts to the RBA's cash rate will remain supportive of housing demand,’’ said Ms Tay. ‘‘However, against an uncertain domestic picture, in part due to the impending end of the mining boom alongside structural change, we expect lingering household caution will unlikely see a more gradual lift in housing demand.’’
The official data is the latest piece of positive news for the housing market, which has been seen increased activity in recent weeks.
Auction clearance rates rose to 63.6 per cent in Sydney last week, improving from 60.1 per cent the week before according to Fairfax-owned Australian Property Monitors. In Melbourne, they slipped to 62 per cent from 64 per cent.
Across the capital cities the rates have remained firmed as the relative calm on global financial markets, coupled with lower rates from the Reserve Bank have spurred more activity in the coming weeks.
Despite the home loans rise, JPMorgan economist Ben Jarman said the figures didn't show much of a turnaround.
‘‘It's an August number so it's capturing more of the RBA's work since the middle of the year," he said. Also, house prices had slipped from the middle of 2010 to the middle of this year.
"Those two factors have combined to force marginal buyers in, once the interest rate got low enough,’’ he said. ‘‘The question is: Is that sustainable?
"With the credit growth remaining low we don't see the fuel for that much housing market turnover,’’ said Mr Jarman. "We think the lack of traction is going to be one of the reasons the RBA cuts further."
Mr Jarman said that the overall debt levels of Australian households was a "pretty significant" constraint to further activity in the housing sector.
Investment lending fell 0.8 per cent in August, after a 2.7 per cent drop in July, the ABS said, while the value of owner-occupied home loans rose 1.3 per cent in August, from a fall of 1.4 per cent in July.
The Reserve Bank has cut 150 basis points from the cash rate since November 2011, amid weaker conditions in the local and worldwide economy. Since then, Australia's major banks have passed along an average of about 115 basis points.