The number of home loans approved has risen for the seventh month in a row, showing the housing sector continues to strengthen.
There were 52,204 approvals in July, compared to 50,983 approvals in June – a rise of 2.4 per cent, the Australian Bureau of Statistics said.
Economists were expecting a 2.0 per cent rise.
In South Australia, the number of loans reached a level of 1,622 (in original terms) in the three months to July 2013, representing a 36.1 per cent increase from the level in the same period in 2012.
“This is the best three-monthly level that South Australia has seen in three years, which makes for an encouraging start into the new financial year,” local Housing Industry Association spokesman Robert Harding said.
“Housing finance is indicating that SA’s residential construction sector in this second half of 2013 is finally starting to recover from what had been a period of protracted decline,” added Robert Harding.
“These figures demonstrate that the decision made by the State Government at the urging of HIA SA to continue the new residential construction grant of $8,500 in June of this year was the correct one.
“The figures which have been released this day indicate that it would certainly be a good policy decision to extend that grant beyond the December cut-off which is currently in place.”
JP Morgan economist Ben Jarman said that although the figures came in stronger than expected, the rise was being driven by investors rather than first-home buyers, who typically take out bigger loans.
“Average loan sizes are falling,” Mr Jarman said.
“At the same time, what you’re getting is activity that is tilted more towards the investor and less toward the first-home buyer, so you’re not getting that uplift in overall credit growth that you get when first-home buyers come into the market.
“It seems like there’s a lot of turnover happening in housing but not enough homes being built and not enough credit growth to make it genuinely stimulatory.
“Without that piece of the puzzle moving we don’t think this will really change the path of the real economy.”
Mr Jarman said one barrier to growth was the high cost of building.
But the wind-down in the mining investment boom would eventually free more resources for the home building sector which would bring prices down, he said.
CommSec chief economist Craig James said he expects the housing market to make more gains as consumer and business confidence improves now that the federal election is out of the way.
“What we are seeing is more commitments being made, but budding buyers are taking their time to make a purchase,” he said.
“What we would hope that, in a more settled environment, people will start spending, investing and hiring.”
Loans made for the purchase of new dwellings rose 5.9 per cent in the month but loans for the construction of dwellings fell 2.1 per cent.
“If newly erected dwellings are being purchased that will reduce the amount of inventories and should encourage further construction,” Mr James said.
“Certainly we should have construction rising at a faster rate than established dwellings so we don’t get caught with unsustainable growth.”
Mr James said the data and continued signs of strength in the housing sector will ensure that the Reserve Bank will hold off on another interest rate cut until 2014.
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