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Australian Home Loan Approvals Tick Up In March

Australian Home Loan Approvals Tick Up In March
May 12, 2015

Data released by the Australian Bureau of Statistics on Tuesday revealed that home loan approvals rose by a seasonally adjusted 1.6 per cent from February to March. Economists surveyed before the release of the data projected home loans to rise only 1 per cent. The value of loans for housing rose by 6.4 per cent in March. But the number of first homebuyers taking out loans fell 14.7 per cent, compared to the 15.1 per cent decrease in February.

As mining sector investments cool off, the housing sector is emerging as one of the few areas of strength in the Australian economy. The Reserve Bank of Australia has warned on several occasions that lower interest rates may exacerbate a potential housing bubble. Earlier in the month, the RBA cut the interest rate once again to 2.0 per cent. At the same time, the central bank is attempting to work with regulators to possibly introduce new restrictions on mortgage lending to mitigate risks in the housing sector. 

Despite the potential new regulations, analysts are projecting strong demand in the Australian housing sector. UBS economist Scott Haslem said that the May interest rate cut was more than enough to boost the housing market in the short-term. “Looking forward, the RBA's May rate cut should provide a further boost to demand, and given the likely ongoing strength of housing, we continue to expect the RBA to hold rates at two per cent ahead,” he said. RBC Capital Markets fixed income and currency strategist Michael Turner believes the previous discussion of new regulations would not hamper the growing housing market. "Relative to at least our expectations, the noises from regulators as of Q1 were perhaps not that influential," he said.

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