Houses located in the Sydney suburb of Coogee can be seen in this aerial picture in Australia, July 26, 2016. -Reuters
Approvals for new home loans in Australia jumped for a second consecutive month in August, in a sign that recent rate cuts and easier lending rules were boosting the housing market though activity elsewhere in the economy remained subdued.
Home loans, a leading indicator for housing prices, showed a solid 3.2% gain in August to A$33.5 billion ($22.60 billion), Thursday's data from the Australian Bureau of Statistics (ABS) showed. Home loans had risen 5% in July. Lending to property investors increased 6%, the largest increase since September 2016.
While upbeat housing activity is likely to boost consumer confidence, which hit a four-year low this month it will also revive concerns about frothiness and a debt binge in the property market when the rest of the economy is still struggling. Australia's housing stock is valued at A$6.8 trillion ($4.83 trillion), or almost four times the country's annual gross domestic product.
"This reinforces our view of a mini-boom," in home prices and loans, said UBS economist George Tharenou. Home prices enjoyed their biggest monthly jump in 2-1/2 years in September. Sydney and Melbourne prices climbed 1.7%, a rate of increase reminiscent of the bubble days of 2016.
"If loans and prices surprisingly continued to boom, it would...raise the risk it stops the RBA from easing next year," added Tharenou, who expects further rate cuts by mid-2020.
The Reserve Bank of Australia (RBA) reduced its benchmark rate to a record low of 0.75% last week following two back-to-back easings in June and July to revive economic growth, employment and inflation.
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