The sluggish housing sector may have turned a corner, after housing finance figures for July showed tentative signs of improvement, economists say.
They also say that stronger economic growth, low unemployment and growing expectations that interest rates will remain on hold until early next year could create better conditions over coming months.
The number of home loans approved in July rose one per cent to 49,813, official figures show.
Economists had forecast a 1.5 per cent rise in housing finance commitments for the month.
July was the fourth straight month that housing finance commitments had risen.
The Australian Bureau of Statistics (ABS) said total housing finance by value – including lending to investors – rose 1.6 per cent in July, seasonally adjusted, to $20.576 billion.
Commonwealth Bank senior economist John Peters said the bounce in housing finance showed the sector was improving.
“We expect housing to remain quite resilient in the coming months as part of our view that the economy is going to pick up speed from here,” Mr Peters said.
“Increasing economic growth and falling unemployment will continue to underpin housing activity.”
JP Morgan economist Helen Kevans said home loan approvals should continue to accelerate throughout the second quarter.
“The decent bounce in housing finance stemmed from fading expectations on the rate hike front, which probably will stimulate home loan demand further in August,” Ms Kevans said.
However, poor financial confidence could weigh on demand for home loans, she said.
“The recent plunge in consumer sentiment, down 12 per cent since mid-year, has been marked by consumers becoming more downbeat on their own finances.”
“Given continued financial market volatility, the negative wealth effects from recent share market falls and declines in house prices (in some areas) likely will weigh further on financial confidence from here.”
St George Bank chief economist Besa Deda said softer housing conditions could continue over the next 12 months, despite the small pick-up in housing finance.
“Affordability is low, buyers are on the sidelines, interest rates are restrictive, so overall housing conditions are in a soft patch,” Ms Deda said.
“There is also a lot of uncertainty globally, which is likely to cause household caution to linger.”
Among the states, Queensland housing finance showed the biggest improvement in July, up 2.3 per cent, seasonally adjusted.
NSW rose 1.5 per cent, and the Australian Capital Territory was up 0.3 per cent.
The largest fall was in South Australia, down 3.9 per cent. Western Australia fell by 1.4 per cent. Victoria was steady.
