Australia home-loan approvals rise most in six months

SYDNEY: Australian home-loan approvals rose in September by the most in six months, reinforcing the central bank’s decision to increase interest rates last week for a second straight month.

The number of loans granted to build or buy houses and apartments climbed 5.1% to 65,505 from August, when they fell a revised 1.9%, the statistics bureau said in Sydney on Nov 9. The median estimate of 17 economists surveyed by Bloomberg was for a 3% gain.

Rising home loans, stoked by grants from Prime Minister Kevin Rudd’s government, add to signs of an economic rebound that will prompt central bank Governor Glenn Stevens to raise borrowing costs for a third month on Dec 1, according to analysts surveyed by Bloomberg. The bank last week said the economy will expand this year at more than three times the pace forecast in August.

“The property market has made a remarkable recovery, with finance approvals up more than 25% from a year ago,” Alex Joiner, an economist at Australia & New Zealand Banking Group Ltd in Melbourne, said ahead of the Nov 9 report.

“However, there are headwinds ahead and first-home buyers will continue to be less active as interest rates rise and grants are wound back,” Joiner added.

First-home buyers accounted for 26.1% of dwellings financed in September, up from 24.7% in August, the statistics bureau said on Nov 9.

Treasurer Wayne Swan last year tripled to A$21,000 ($65,543) a grant to first-time buyers of new homes, and doubled to A$14,000 payments for those purchasing existing dwellings. In May, he extended the increases through to the end of September, when they were partially reduced. The payments will be cut to their original A$7,000 at the end of this year.

Governor Stevens last week became the first central banker in the world to raise borrowing costs twice this year, when he increased the official cash rate target to 3.5%, citing a rebound in consumer confidence and Chinese demand for exports.

Policy makers will boost the overnight cash rate target by another quarter percentage point next month to 3.75%, according to 14 of 17 economists surveyed by Bloomberg. That would be the first time in history the central bank has boosted borrowing costs at three successive meetings.

Investors are betting there is a 64% chance Stevens will raise the rate by a quarter point, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12.32 am on Nov 9.

Gross domestic product will expand 1.75% this year and 3.25% in 2010, the bank said on Nov 6. Three months ago, it forecast gains of 0.5% and 2.25% respectively.

Jobs advertised in newspapers and on the Internet fell 1.7% in October, according to an Australia & New Zealand Banking Group Ltd report released in Melbourne On Nov 9.

Speculation that Stevens will continue to raise borrowing costs, as counterparts in the US, Europe and the UK keep their benchmark rates at historic lows, has pushed Australia’s currency toward parity with the US dollar.

Australia’s currency will trade for US$1 next year, according to forecasters at Citigroup Inc, Calyon, Barclays Capital and National Australia Bank Ltd., implying a gain of 8% in addition to this year’s 31% advance.

Demand for home loans surged in the first half of this year after the central bank slashed the benchmark rate by a record 4.25 percentage points between September 2008 and April.

The total value of loans rose 4.8% to A$23.8 billion in September, the report showed.

The value of lending to owner-occupiers gained 6.7%. The value of loans to investors who plan to rent or resell homes slipped 0.1%. – Bloomberg LP