Many commentator believe that the real estate market in Australia has ‘bottomed out’ on the sluggishness from the global financial crisis, rising interest rates and the global economic slowdown and that we are now witnessing an increasingly buoyant market. According to financial data, the number of new home loans for owner-occupiers rose 2.5% in November, the most since May, despite higher interest rates. Home loans rose by the most in six months in November while lending to buy new homes jumped, a positive for the economy and a major surprise given mortgage rates had risen sharply that month. Data released by the Australian Bureau of Statistics today showed the number of loans to buy owner-occupied housing rose 2.5 per cent, handily beating forecasts for a 1.5 per cent fall.
The Australian dollar gained about a fifth of a US cent in the wake of the report, having earlier plumbed a one-month low around 98.03 US cents on worries the worsening floods in the country’s northeast will crimp economic growth.
“There is certainly evidence here that housing lending has troughed,” said Scott Haslem, chief economist at UBS. “This is clearly a positive for some modest pick-up in housing credit growth which has been ebbing lower over recent months.”
The gains came despite a move in early November by the Reserve Bank to raise its cash rate 25 basis points to 4.75 per cent as a pre-emptive strike against inflation. Major banks lifted mortgage rates even more, blaming higher funding costs in the wake of the global financial crisis.
The unexpected growth in the number of new home loans in November will have little effect on interest rates until the full toll of the Queensland floods is known, economists said.
‘‘Our view before the floods is that the RBA would be on hold until April,” CBA’s Mr McIntyre said. ”It’s too early to say at this point what the economic impact will be.’’
Commonwealth Bank was holding to its April rate rise prediction, although there is a chance the RBA’s decision to raise the cash rate by 25 basis points in November could impact on the December Housing Finance figures.
‘‘It could be December, or maybe January, but we could be seeing some insulation from our strong labour market, which could buffer interest rate rises. Obviously, there is going to be a big boost to housing construction with all of the floods in Queensland, but that’s a story for later in the year.’’