The number of approvals gained 6.8% to 13,710 from August
Australia's home-building approvals rose almost seven times as much as forecast in September as a housing shortage and rising rents encouraged investors to buy property.
Sold: A housing shortage and rising rents encouraged investors to buy property, causing home-building approvals to rise more than expectedThe number of approvals to build or renovate houses and apartments gained 6.8 per cent from August to 13,710, the Bureau of Statistics said yesterday in Sydney. The median estimate of 23 economists surveyed by Bloomberg News was for a one per cent increase.
Australia's lowest jobless rate in 33 years and rising wages are driving an economy that is expanding at the fastest annual pace in three years. Rents in Australia's largest cities have climbed after a construction slowdown last year cut the supply of housing just as rising immigration spurred demand.
'We still have quite a lot of investors going into the property market, as opposed to first-time buyers,' Helen Kevans, an economist at JPMorgan Chase & Co, said in Sydney before the report was released. 'They are less affected by the affordability crisis.' The Australian dollar rose to 92.30 US cents at 11.35 am in Sydney from 92.08 US cents immediately before the report. The yield on the benchmark 10-year government bond was unchanged at 6.13 per cent.
Building approvals fell a revised 1.8 per cent in August. Approvals were 4.2 per cent higher in September than a year earlier, yesterday's report showed.
Rental yields are rising amid 'historically tight vacancy rates', according to the Real Estate Institute. The cost of renting a two-bedroom apartment in Darwin rose as much as 36 per cent in the 12 months ended June, while vacancy rates have fallen below 1.5 per cent in Sydney, Melbourne and Adelaide, the institute said.
'Rent increases offer the prospect of improved yields for investors, thus attracting more investors back into the housing market,' Graham Joyce, president of the Real Estate Institute, said last month. Still, 'first- home buyers will face even greater difficulty accumulating a deposit for a home purchase, with rents increasing'. Higher mortgage repayments, coupled with rising labour and material costs, pushed housing affordability to a record low in the third quarter.
The Reserve Bank of Australia raised its benchmark overnight cash rate target a quarter point to 6.5 per cent in August. That increased the average monthly payment on a mortgage to A$2,606 (S$3,480) last quarter, from A$2,506 in previous three months, according to the Commonwealth Bank of Australia and the Housing Industry Association.
The central bank will raise its key rate again on Nov 7 by another 25 basis points to 6.75 per cent, according to all 24 economists surveyed by Bloomberg News this week.
Approvals to build private houses rose 2.5 per cent to 9,041 in September, the biggest increase in a year, yesterday's report showed. Approvals for apartments or renovations jumped 13.8 per cent to 4,091.
Boral Ltd, Australia's biggest seller of building materials, this week forecast profit will decline for a fourth consecutive year because of the housing slowdown. Its building products unit derives about 80 per cent of sales from Australian home building.
'Activity levels in New South Wales housing construction are the lowest they have been over the past 35 years and they are approximately 40 per cent below the levels of longer- term underlying demand,' the company said in a statement. 'The first quarter of this new financial year has seen some softening in Western Australia.' - Bloomberg
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