"First home buyers have been quite a large drag on this data for most of 2013, but offsetting their weakness is a pickup in investor activity which is tracking at historically high levels"
-Tom Kennedy, JP Morgan economist
The Australian Dollar weakened versus most of its Group of 10 counterparts ahead of the upcoming RBA minutes and after figures showed home-loan approvals plunged for the first time this year, with the share of first time buyers applying for a new loan hitting the lowest in almost 10 years. On Monday the Aussie extended a drop against the Kiwi to a second session, as a report from the Australian Bureau of Statistics showed the number of housing loans plunged almost 4% to 49,900 from July to August, after six consecutive months of gains. Furthermore, the share of first-home buyers fell to 13.7% from 14.7% in July, touching the lowest since April 2004. Due to record low interest rate, the demand for property has been steadily strengthening from 44,000 a month last year to 52,000 in July. Figures also showed the value of new loans declined 1.2% to $23.8 billion, while the average loan size reached $299,800. Even despite weaker figures, the Reserve Bank of Australia will take heart that the number of new loans for new construction rose 2.2%, and the fact they make up about 10% of the total number of loans, is suggesting the property market is gaining momentum. The RBA has cut interest rates eight times since November 2011 in a bid to revive the economy, especially activity in weaker parts, including retail sector and housing construction. The latest adjustment was made in August, when Australian policymakers took the benchmark rate to a fresh low of 2.5%. However, the fact that first home buyers are still struggling is raising concerns the easing cycle is not finished yet.
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