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SYDNEY - Australia's home-building approvals unexpectedly increased to a five-month high in July as rising employment, wages and immigration encouraged investment in property.
The number of approvals to build or renovate houses and apartments advanced 0.4 per cent from June to 12,980, the Bureau of Statistics said yesterday.
The median estimate of 24 economists surveyed by Bloomberg News was for a 2 per cent drop.
Australia's lowest jobless rate in 33 years and near-record consumer confidence is boosting an economy in its 16th year of expansion.
Property investors are returning to the market as rents increase after a construction slowdown last year cut housing supply just as rising immigration boosted demand.
"The signs are there for a lift in construction activity in the next 12 months," said Michael Blythe, chief economist at Commonwealth Bank of Australia, the nation's largest mortgage lender. "We will see that at some point, with vacancy rates low and rents high."
"There are several good reasons to expect residential construction will increase over the coming year," said John Edwards, chief economist at HSBC Bank Australia in Sydney.
"Immigration is high; there have been substantial gains in employment and incomes."
Last year more than 3450 people arrived in Australia every week in the first six months, the Immigration Department said. More than half the immigrants who arrived in the following six months were either professionals or tradespeople, it said.
Also encouraging property construction, rental vacancy rates have fallen to decade lows, and are less than 2 per cent in Australia's six largest cities, driving up rents by an average 10 per cent for a two-bedroom apartment, the Real Estate Institute said.
"We're really at the bottom of the Australian housing cycle," Rod Pearse, chief executive officer of Boral said last month.
"We're in good position for when this market comes back."
Boral, Australia's biggest seller of building materials, posted a 21 per cent drop in second-half profit on waning demand for new homes and reduced sales in the United States.
Demand plunged in New South Wales but Pearce said "there will be a strong recovery in the next five years."
Still, higher borrowing costs may stifle housing demand.
The Reserve Bank of Australia raised the overnight cash rate target a quarter percentage point to 6.5 per cent, the highest in almost 11 years, on August 8. That followed increases in February, August and November last year.
The four rate adjustments have added about A$160 ($131) a month to repayments on the average home mortgage of A$250,000, the Housing Industry Association said.
About 23 per cent of homeowners have had to cut spending to pay their mortgages, a survey of 2500 consumers conducted in March by JPMorgan Chase showed.
Home-building contributed just 0.1 percentage point to the first quarter's economic growth rate of 1.6 per cent from the previous three months.
-Bloomberg
