(Australian Associated Press)
An unexpected leap in apartment approvals in February intensifies risks in the housing market, analysts warn.
Approvals for apartment blocks and townhouses leapt 10.9 per cent and private sector house approvals rose 5.3 per cent, taking overall approvals to 8.3 per cent, Australian Bureau of Statistics data showed on Monday.
That was far above the market forecast of a 1.5 per cent fall in overall approvals.
JP Morgan economist Henry St John said the rebound in apartment approvals was concerning given the high level of supply due to hit the market in the next 12 months.
“This is not the ideal composition for residential approvals growth, and looking past month to month whip-sawing, we would not expect such strength in high density to persist,” he said in a note on Monday.
“That said, there are some signs that while local banks are pulling back in financing these developments, other institutions are still lending against this activity.”
Citi economists said the combination of rising approvals with CoreLogic data on Monday showing annual house prices leaping more than 10 per cent in Sydney and Melbourne highlighted the risk of a housing market bust.
They said the Australian Prudential Regulation Authority’s tightening of lending standards last Friday may be a case of too little, too late.
The economists said the Reserve Bank of Australia was wedged between the temptation to boost growth and inflation by cutting rates and needing to maintain or raise rates to keep investor home loans in check.
“The RBA will have to sit back and see if the latest round of macro-prudential measures can tame the housing market and hope that consumers don’t slow spending any further in the meantime,” Citi economists said.