Brighter outlook for Australia’s housing market

The number of home loans approved in November has beaten market expectations and the prospects for 2012 look good, economists say.

The Australian Bureau of Statistics (ABS) said on January 16 the number of mortgages approved in November rose 1.4 percent to 46,953. Macquarie senior economist Brian Redican said the data was encouraging.

“Definitely, we are seeing a step in the right direction,” he said.

Mr. Redican said the housing sector might receive a boost from the two successive interest rate cuts by the Reserve Bank of Australia (RBA) late last year, and the prospect of more cuts to come in 2012.

“These numbers don’t reflect those cuts yet and it will have to take a few more months for that to flow through. What it does do is just make housing more affordable for those people that were thinking of going into the housing market.”

The ABS also reported that total housing finance by value rose 2.1 percent in November, seasonally adjusted, to $20.344 billion.

Westpac senior currency strategist Sean Callow said the November home loan approvals data usually don’t surprise because banks already have good information on that month.

He added it was too early to see the market’s reaction to the November interest rate cut.

“If you were thinking about taking out a new loan on the rate cut you wouldn’t do so until the rate actually fell,” he said.

“Australian housing finance is very close to expectations.

“By state, NSW remains an outperformer, plus 4.2 percent, though perhaps flattered by approvals being brought forward ahead of the January 1 increase in state stamp duty.

“New South Wales had a horror start to the year but it’s risen every month since then.

“Oversupply seems to be hurting Victoria, minus 0.2 percent for a third consecutive decline.

“Queensland remains sluggish, up 0.9 percent, only after two declines while WA held up with a 0.9 percent gain.”

Mr. Callow said the result was OK in national terms.

St George chief economist Besa Deda said the data showed that conditions in the housing sector were slowly improving.

She said that while November’s interest rate cut may have helped boost the figures, housing finance numbers had been rising since April 2011.

“I think the rate cut would have helped, but I don’t think you can say it is entirely due to that,” she said.

Ms Deda said a rise in the number of first-home buyers was also good news and would help stabilize house prices in 2012.

“That’s also a positive element because it means that it is helping improve the liquidity in the market.

“We think it will help in the stabilization of house prices in the first half of this year and that a modest improvement in house prices will come next year.”

First-home buyers accounted for 20 percent of total owner-occupied housing commitments for November, up from 19.1 percent for the previous month.

Australia’s unemployment rate tipped to rise in 2012

Australia is set for a higher rate of unemployment in 2012, new figures show.

The number of job advertisements on the internet and in newspapers fell 0.9 percent in December 2011 compared with the previous month.

Total job ads were 2.6 percent lower than in December 2010 - the first negative annual growth rate since February 2010.

ANZ also reported a fall of 0.8 percent in the trend measure of total job ads in December.

The bank’s head of Australian economics Katie Dean said this “points to, at best, modest employment gains for the Australian economy over the coming months”.

“Indeed, the current trend rate of employment growth is unlikely to be fast enough to absorb the forecast growth in the labour force in the short term,” Ms. Dean said.

“As a result, ANZ forecasts the unemployment rate to rise to 5.5 percent by mid-2012.”

She said she expected the unemployment rate to stay at this elevated level for most of 2012, before falling modestly in 2013 as economic activity started to pick-up, in response to strong mining and infrastructure investment and a likely extended period of relatively-low domestic interest rates.

Australia’s unemployment rate was last reported to be 5.3 percent in November.

The Australian Bureau of Statistics on Thursday releases official employment figures for the month of December.

The median market forecast is for 10,000 jobs to have been added in the month with the unemployment rate staying at 5.3 percent.