Home loan approvals rose for the ninth time in 10 months as the housing sector strengthens, benefitting from record low interest rates.
Home loan approvals rose 1.0 per cent in October, and the value of home loans rose 4.1 per cent, the Australian Bureau of Statistics said.
JP Morgan economist Tom Kennedy was encouraged by the increases in housing finance for the purchase of new dwellings, and the construction of dwellings.
“When you look at the breakdown it was fairly broadbased,” he said.
“Construction loans, which is the one that the Reserve Bank of Australia has been targeting, trying to get a bit of a lift in that sector, they were up about one per cent and that is its third consecutive monthly increase, there are tentative signs of life in that sector.
“This is really representative of strength in the housing market and the continual demand for property.”
Mr Kennedy expects the housing sector to continue strengthening in the new year but should not have much of an impact on future RBA interest rate decisions, with the next one not being until February.
“We don’t think at this stage that the uptick in house prices has been too much of a concern for the RBA and activity is coming off pretty low levels, so we think it has a while to run,” he said.
The value of home loans for owner occupied housing rose by 1.7 per cent in October and the value of investment housing rose by 8.2 per cent.
CommSec chief economist Craig James said the key to the rise in housing investment is what is being bought.
“The good news is that investors aren’t just buying established dwellings and driving up home prices, but money is being ploughed into new house and apartment developments and adding to housing supply and economic activity,” he said.
“It is clear that home construction will play a key role in driving the broader economy in 2014, taking over from the mining sector. And arguably more industries and regions will feel the benefit of increased home building rather than mining construction.”
Mr James said an increase in housing investment is also good news for renters.
“Many young Australians are banking on investors funding new housing developments, given that preferences have shifted to renting rather than buying in recent years,” he said.
“Home supply is rising and that will keep growth in rents under control.”
Story: Reported by AAP Source: www.ninemsn.com.au