Housing finance flat-lined in October, providing economists with little clue as to what the Reserve Bank will do next time the board meets.
According to data from the Australian Bureau of Statistics, the number of loans for the purchase of new dwellings increased by 4.2 per cent, while the number of loans for construction eased by 0.3 per cent – hitting its lowest level since January.
The number of loans for existing property, net of refinancing, eased by 0.1 per cent, while on the investment front, the value of loans for existing property fell by 1.5 per cent.
“There has been some modest improvement in total housing finance since mid-2012 and at face value that is an encouraging development,” Housing Industry Association chief economist Harley Dale said.
“Looking over the three months to October this year, the number of loans is up for new dwellings, down for construction, and up for existing property (net of refinancing). Across states and territories, new home lending is up in New South Wales, Western Australia, and Tasmania, but is down in Victoria, Queensland, South Australia, the Northern Territory and the Australian Capital Territory.
“Some signs of recovery are better than none and that is what the housing finance figures are showing. A pull-back in loans for construction over the October 2012 ‘quarter’ is clearly an area for concern, however, as is the decline in new home lending in a majority of state and territories.
“We also need to take note that a methodological issue with the measurement of housing finance may be exaggerating signs of recovery in 2012.
“The bottom line is that across finance and the full suite of leading housing indicators, there would normally be clearer signs of a new home building recovery by now given where interest rates are set.
“Monetary policy is not as effective in this cycle and more cuts should be delivered. However, governments can’t sit back and presume that lower interest rates will do all that is required to elicit the recovery in residential construction required to rebalance economic growth.”