Interest rate hikes fail to dampen housing demand
(SYDNEY) Australian homebuilding approvals rose in March at the fastest pace since 2002, a sign that housing demand hasn't been dampened by the central bank's world-leading round of interest-rate increases.
The number of permits granted to build or renovate houses and apartments gained 15.3 per cent from February, when they dropped a revised 2.7 per cent, the Bureau of Statistics said in Sydney yesterday.
The median estimate of 22 economists surveyed by Bloomberg News was for a 0.8 per cent gain.
The Reserve Bank of Australia boosted the benchmark lending rate on Tuesday for the sixth time in seven meetings, pushing borrowing costs to what Governor Glenn Stevens described as 'average' levels.
The moves are partly aimed at preventing a property bubble after housing prices surged 20 per cent in the 12 months through March.
Yesterday's report is 'encouraging and a good leading indicator for employment, particularly for workers in the construction industry,' said Michael Turner, an economist at 4Cast Ltd in Sydney, whose prediction of a 6 per cent gain in approvals was the closest of the analysts surveyed by Bloomberg.
Still, home-building approval figures are 'highly volatile,' Mr Turner said. 'You'd imagine there have been one or two large projects' approved in New South Wales and Victoria, Australia's most populous states.
The Australian dollar rose to 91.02 US cents at 12.12 pm in Sydney from 90.89 cents just before the report was released. The two-year government bond yield was unchanged at 4.90 per cent.
Approvals fell more than 8 per cent in the first two months of this year after Prime Minister Kevin Rudd reduced grants on Jan 1 to first-time buyers of new homes to A$7,000 (S$8,800) from as much as A$21,000.
Home-loan approvals declined in February for a fifth straight month, dropping 1.8 per cent to 50,287 from January, a report showed on April 12.
Rising house prices, inflation and a forecast mining boom triggered by surging Chinese demand for Australian exports of iron ore and coal, were among reasons Governor Stevens increased the overnight cash rate target on Tuesday by a quarter point to 4.5 per cent.
Policy makers have moved the benchmark rate by 1.5 percentage points from a half-century low of 3 per cent in early October, adding about A$3,600 a year to repayments on an average A$300,000 mortgage.
Mr Stevens said on Tuesday that the bank's increases represent a 'significant adjustment', a signal that policy makers may refrain from moving again next month, according to all 24 economists surveyed by Bloomberg News after the decision.
Approvals to build private houses rose 0.5 per cent to 9,779 in March from February.
Approvals for apartments and renovations advanced 59.9 per cent to 4,558.
Australia's services industry also expanded in April for the first time in five months, according to an index published yesterday by Commonwealth Bank of Australia and the Australian Industry Group.
The gauge gained 3.4 points to 52.3 from March. -- Bloomberg
Source: Business Times, 6 May 2010
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