Australia’s property market boom is cooling off but housing remains a shining light of the economy.
The number of home loan approvals was steady in May, Australian Bureau of Statistics figures showed on Friday – better than the 0.5 per cent fall economists were expecting.
The figures were another sign that the housing market was taking a break after a year of strong growth, ANZ head of Australian economics Justin Fabo said.
“Housing finance has flattened out at a pretty high level. It’s risen substantially and now, along with building approvals, it’s just taking a bit of a pause,” Mr Fabo said.
“The level of activity – approvals, auction clearance rates – they’re all still at pretty high levels relative to recent years so it’s still strong, it’s just not getting stronger.”
CommSec economist Savanth Sebastian said it was a welcome development that “some of the froth” had been removed from the housing market.
But despite cooling down, housing was still taking the baton from mining as the big driver of growth in the economy, he said.
Record high building approvals earlier in the year meant an “avalanche” of home construction was set to take place over the next 12 months, he said.
“The housing boom is cooling off but it’s still going to remain relatively strong,” Mr Sebastian said.
“It’s going to be the big driver of growth for the Australian economy – it’s supporting employment and it’s supporting retail, particularly furniture and floor covering.
“It’s really taken that baton from mining.”
The share of first-home buyer loans had also lifted from record lows in April, Mr Sebastian said.
JP Morgan economist Ben Jarman said the value of new loan commitments to property investors fell, possibly due to the dip in house prices in May.
But that could be temporary, given prices bounced back in July, he said.
“Loans to investors are still very elevated in value terms, so the debate around first-home buyers being priced out will continue,” he said.
“But, for monetary policy at least, investor lending appears less of a threat to the RBA’s easy stance than earlier in the year.”