Home loans by value fell in October and remained flat over the year, suggesting the housing sector remains stagnant.
The Australian Bureau of Statistics (ABS) said on Monday that total housing finance by value fell 2.5 per cent in October, seasonally adjusted, to $20.458 billion.
The ABS data also showed that the value of home loans was largely unchanged from October 2010, when it was reported at $20.593 billion.
The number of home loans approved in October 2011 rose 0.7 per cent.
National Australia Bank chief economist Robert Henderson said Monday’s data showed the housing market was still deteriorating.
Mr Henderson said it was a fairly dismal report on the housing market, with falling lending in value terms and construction and investment lending both weak.
Recent data, including the national accounts figures released last week, have highlighted the weakness of the housing sector.
“It is clear that over the foreseeable future Australia will fall well short of building the number of new homes required for both owner-occupiers and renters,” Housing Industry Association chief economist Harley Dale said.
“Amidst the growing risks to our economy from the situation in Europe, now is the time to be providing stimulus to the new home building sector while at the same time reinvigorating the housing supply reform process, which currently lies dormant.”
Commonwealth Bank of Australia senior economist Michael Workman said Monday’s ABS figures were a little softer than he expected.
“If you go back and look at the data over the last 15 years or so, housing credit growth still remains exceptionally weak.
“So, for the housing market, it’s strongly biased towards the buyers rather than sellers and it looks like it’s going to stay that way.”
Mr Workman said the Australian dollar and local bond futures were largely unaffected by the data.
RBC Capital Markets fixed income and currency strategist Michael Turner said the October housing figures were a little dated.
“China has already reported trade data for November, and the finance data do not reflect the November and December (monetary) policy easing (in Australia),” he said.
“As such, there are limited implications for markets.
“We expect more timely domestic data to better reflect the softening in global growth in coming months, which should justify further easing (of interest rates) and a move to accommodative territory in 2012.”
ICAP senior economist Adam Carr said the housing data showed the Australian lending market was recovering even before the Reserve Bank of Australia (RBA) cut interest rates.
The cash rate is now at 4.25 per cent after two consecutive 25-basis point cuts in November and December.
“The 50-basis points worth of cuts we’ve seen will likely see lending growth accelerate over coming months, which will start to add to the strong private demand numbers we’ve seen to date,” Mr Carr said.
