- Savanth Sebastian, CommSec economist
Australia's home-loan approvals declined sharply in May from April, despite a cut to the official cash rate by the Reserve Bank of Australia. The number of home-loan approvals plunged 6.1%, against economists' expectations for a 3% decrease, as all-time low interest rates failed to boost a take-up of loans. There were 50,366 approvals in May, compared with 53,951 approvals in April, according to seasonally-adjusted data released by the Australian Bureau of Statistics. It was the first drop in four months, and the smallest amount of approvals since late 2013, and the sharpest decline in five years for loans to build new homes. Home-loan approvals to build new houses plummeted by 8.3% in the reported period. Meanwhile, approvals to buy existing new homes climbed by 0.3%, while lending for already built houses dropped by 6.2%. The value of total housing finance shrank 4.4% in the month to $31.14 billion. The decrease in May is a possible sign that tighter lending criteria for investment loans introduced by the banking regulator is cooling the market.
Australia's central bank has cut interest rate twice this year to prop up growth, to a historic-low 2%. While some signs are emerging of stronger job creation across the economy, low rates are also fanning a boom in property investment in Sydney, Australia's most populous city.
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