The housing construction sector is continuing to strengthen, helped by a surge in investment housing.
The number of home loans approved in February rose 2.3 per cent, official figures show, better than the two per cent rise market economists had been expecting.
JP Morgan economist Ben Jarman said the housing sector is clearly in recovery mode, with the number of loans to investors for construction doubling in the month.
“Building approvals are in a clear upswing, while prices, average loan sizes, and loans to investors are rising very swiftly,” he said.
“The Reserve Bank has been hoping activity in housing would transform into more home building and if you’ve got loans for investor construction jumping a lot that’s obviously a positive,” he said.
But first home buyers continued to drop out of the market, with their share of new loans falling 12.5 per cent, Mr Jarman said.
Total housing finance by value rose by 2.9 per cent in February, seasonally adjusted, to $27.644 billion, the Australian Bureau of Statistics said on Wednesday.
Investment housing by value rose 4.4 per cent in the month and housing for owner occupiers rose 1.9 per cent.
Commonwealth Bank senior economist John Peters said the figures are further confirmation that the recovery in housing construction is well underway.
“Low interest rates, the expectations of capital gains and only a moderate lift in the dwelling stock have lured investors to the market,” he said.
“There is further evidence self-managed superannuation funds are certainly gearing into property at the moment.
“It also tells us something about first home buyers, they’re finding it difficult to get into the market.
“There’s a lot of caution, households are saving a lot more and they are very reticent about taking out new loans.”
Mr Peters said the housing sector looks like it will take over from mining investment as the main driver of growth for the Australian economy.
“The evidence is there that the housing market is picking up and we expect it to continue to do so,” he said.
Housing Industry Association economist Diwa Hopkins is encouraged by the continuing strength of the home building sector, but the rise in construction of new homes needs to continue.
“Today’s housing finance results auger well for much needed further growth in new home building,” she said.
“A sustained increase in new home building activity which provides Australia with an appropriate supply of housing is a necessary condition for addressing the persistent problems around housing affordability.”