INVESTORS are boosting activity in the housing market meaning the Reserve Bank is unlikely to cut interest rates this year, economists say.
The number of home loan approvals rose 0.9 per cent in November, beating market expectations of a 0.3 per cent fall, according to the Australian Bureau of Statistics.
Housing Industry Association chief economist Harley Dale said the results indicated the new home building sector will continue to provide strong support to the broader economy through the first half of 2017.
The new home lending cycle has peaked, but the November results confirm that the elevated volumes of lending we have seen over the last three and a half years remained in play as 2016 neared an end,” Dr Dale said in a note. “That’s a tick in the box for the Australian economy.”
While the value of total housing finance rose 2.2 per cent to $33.2 billion in the month, that mainly consisted of loans for housing investments, which rose 4.9 per cent.
Owner-occupied housing rose 0.4 per cent in November, meaning the proportion of home loans for first home buyers is falling.
ANZ economists said first home buyers have slipped to just 8.7 per cent of total housing finance commitments. “Unfortunately for first home buyers, the strong price growth in recent months is not such a happy story,” they said in a note.
“Hampered by price increases, soft wages growth, and low interest rates affecting the return on savings, the number of first home buyers per month has actually fallen slightly over the past year.”
Commonwealth Bank economist Kristina Clifton said record low interest rates and rising prices were sustaining housing market activity and the November figures would provide the Reserve Bank with reason to avoid further rate cuts in 2017.
“Higher debt levels together with sluggish growth in incomes will see the household debt to income ratio continue to trend higher,” she said in a note. “The RBA has made it clear that this is of some concern and is a key reason why it is unlikely that we will see further rate cuts this year.”