Interpac Business and Migration Solutions Melbourne Australia

(November 10, 2011)

The number of home loans rose for the sixth straight month in September, with more gains expected to flow through following the recent cut to interest rates.

The number of home loans rose 2.2 per cent in September, seasonally adjusted, following a 1.2 per cent rise in August, according to the Australian Bureau of Statistics, beating economists' expectations. The market had expected a 1.5 per cent rise.

"Overall it's a fairly good set of numbers for the month," said ANZ real estate economist David Cannington. "Considering a lot of the uncertainty and household caution we saw in September."

Construction of new dwellings fell 0.2 per cent in the September, while the purchase of new homes slumped 0.7 per cent, the ABS said. The Reserve Bank's decision to cut interest rates this month is expected to spur more borrowing for homes although that uptick in demand may not be seen until 2011.

The RBA cut the cash rate to 4.5 per cent this month, from 4.75 per cent where it had been since November 2010.

"Steady rates, with a bias to cut has been encouraging buyers back into the market," said Moody's Economy.com analyst Katrina Ell. "Housing finance commitments will also be boosted in coming months by November’s 25 basis point rate cut," she said.

Home loans in New South Wales rose 3.9 per cent, seasonally adjusted, after the NSW government extended it stamp duty exemption on homes under $600,000 until the end of December.

In Victoria, home loans dropped 0.2 per cent in the month. South Australia saw the biggest monthly gain of 7.6 per cent in the month. In Queensland, still struggling with the impact of the floods, loans slipped 0.2 per cent. In the other mining state of Western Australia, loans increased 0.5 per cent.

Home loans in Tasmania fell 2.1 per cent, while they jumped 6 per cent in the Australian Capital Territory.

Despite the string of monthly rises in home loans and the impact of lower rates to come, the housing market has struggled with more subdued growth through most of 2011. The weaker growth has sent prices lower for nine consecutive months, while knocking auction clearance rates to around the 50 per cent level in Melbourne and Sydney.

The shift by households to pay down debt rather than to gear up further may also limit the expansion in the housing sector, according to Westpac senior economist Matthew Hassan.

"The housing sector is facing a number of headwinds-interest rates, stretched housing affordability and household's desire to pay down debt," he said.

"These forces are offsetting the positives of rising household incomes, relatively low unemployment and a shortage of housing stock," said Mr Hassan.

Source from Theage.com.au