Australia's housing market roars back, boosting wealth and construction

Sydney

AUSTRALIA'S housing market has come roaring back to life as record-low interest rates stoke demand from first-time buyers, lifting approvals for new homes to 20-year highs and delivering a major windfall to consumer wealth.

Data from property consultant CoreLogic out on Tuesday showed home prices rose 0.8 per cent in November, twice the gain seen in October, leaving them 3.1 per cent up on the year.

"In November, demand for NAB home loans was stronger than we've seen for more than two years," said National Australia Bank executive for home ownership Andy Kerr. "Applications over the past six weeks are up more than 25 per cent against the prior six weeks.

"We expect strong interest to continue given the likelihood of low rates for several years." That will be a welcome boost to consumer spending power given Australia's housing stock is estimated to be worth a heady A$7.2 trillion (S$7.1 trillion).

It has already revived the construction sector with approvals for new homes beating all expectations with a rise of 3.8 per cent in October. Approvals for detached houses were up almost 32 per cent on a year ago, at the highest since 2000.

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That was a remarkable turnaround from the depths of the novel coronavirus lockdown in April when analysts feared home prices could dive 10 per cent or more this year, and owes much to aggressive fiscal and monetary easing.

Just last month, the Reserve Bank of Australia (RBA) cut rates to an all-time low of 0.1 per cent and ramped up its bond buying in an effort to compress mortgage costs even further.

The central bank stood pat at its last policy meeting of the year on Tuesday, as expected, as recent data points to a faster economic recovery than first thought.

Figures due on Wednesday are forecast to show gross domestic product (GDP) rebounded by 2.5 per cent in the third quarter, the largest gain since 2008. That would partially recoup the second quarter's 7.0 per cent decline and leave output down 4.5 per cent on the year.

Consumer spending has led the recovery as massive fiscal stimulus underpinned incomes and employment. Data out on Tuesday showed government spending rose another 1.2 per cent in the third quarter, adding 0.3 percentage points to GDP.

All this spending did suck in more foreign goods such that net exports subtracted a sizeable 1.9 percentage points from GDP in the quarter.

Yet the strength of Chinese demand for Australian resources meant the country still notched up a solid current account surplus of A$10 billion. REUTERS