Australia’s home-loan approvals climbed for a third straight month in February as rising wages buoyed confidence among property buyers, signaling a nascent housing recovery that may boost economic growth.
The number of loans to owner-occupiers to build or buy homes or apartments rose 0.3 percent to 62,369 from January, the Bureau of Statistics said in Sydney today, matching the median estimate of 20 economists in a Bloomberg News survey.
A housing pickup may bolster expectations among futures and currency traders that the Reserve Bank of Australia is poised to raise interest rates as soon as next month. The economy’s 16- year expansion may gather pace as home-buyers shrug off last year’s three rate increases and investors return to the property market to take advantage of rising rents.
“Households appear to have adjusted very well to three rate hikes, so the cash rate clearly isn’t that restrictive,'’ said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. “It supports the Reserve Bank’s tightening bias. All the data in early 2007 has shown a real step up in the economy.'’
The Australian dollar rose close to a 17-year high after the report. The currency bought 82.46 U.S. cents at 4:32 p.m. in Sydney from 82.38 cents immediately before the figures were released. The yield on the 10-year bond fell 1 basis point, or 0.01 percentage point, to 5.89 percent.
Total lending climbed 3.3 percent to A$20.9 billion ($17.2 billion) in February, today’s report showed. The number of loans approved in January gained a revised 0.5 percent.
Investor Surge
The value of lending to owner-occupiers rose 0.9 percent to A$14.3 billion in February. The value of lending to investors who plan to rent or resell homes surged 8.9 percent to A$6.6 billion.
Australia’s A$934 billion economy added more than 300,000 jobs last year, the biggest annual employment gain since 1989, and the jobless rate is close to a 31-year low.
Wages rose 1.1 percent in the fourth quarter from the previous three months, according to a government index, the fastest pace of growth in the index’s nine-year history.
That buoyed home-buyers even after the Reserve Bank’s three interest-rate increases last year, which took the benchmark overnight cash rate target to a six-year high of 6.25 percent.
The central bank is fighting an annual inflation rate that breached its target of between 2 percent and 3 percent for three straight quarters.
Inflation “is more likely to be too high than too low in the period we can foresee,'’ Reserve Bank Assistant Governor Malcolm Edey said in a speech last month.
Rate Expectations
Futures traders today rate the probability of the Reserve Bank raising borrowing costs next month at 57 percent, according to a Credit Suisse index of interest-rate futures.
The Australian dollar has climbed 5.7 percent in the past month as traders bet the Reserve Bank will increase the gap between its benchmark rate and that in the U.S., which has been 5.25 percent for almost a year.
Investors are returning to the property market this year as the rental vacancy rate hits a 10-year low in most of Australia’s biggest cities, driving up rents. That’s because a building slowdown in 2005 has created a housing shortage just as rising immigration is spurring demand.
Net migration to Australia, measuring permanent arrivals minus departures, rose 8 percent in the 12 months ended June 30, 2006, the government estimates.
Rents Increase
Rents for three-bedroom houses in Sydney, Australia’s largest city, climbed almost 6 percent last year, according to the Real Estate Institute of Australia. Rents in Perth, the largest city in resource-rich Western Australia state, surged 17 percent.
“We’ve got pent-up demand, and at current levels of building, that situation is going to get worse before it gets better,'’ said Matthew Hassan, a senior economist at Westpac Banking Corp. in Sydney.
The economy expanded 1 percent in the three months ended Dec. 31 from the previous quarter, with home-building contributing 0.1 percentage point.
The number of loans to buy newly built dwellings climbed 0.9 percent in February, today’s report showed. Loans to build houses dropped 1.7 percent. –Bloomberg
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