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Property market shows signs of life
Property market shows signs of life

Australia's housing sector is showing tentative signs of improving, despite continued caution from property investors, economists say.

Official data released today showed that the number of home loans approved in August rose 1.8 per cent to 45,821.

That was from an upwardly revised 45,021 in July.

Economists had expected housing finance commitments to rise 1.5 per cent in August.

The Australian Bureau of Statistics said that total housing finance by value rose 0.6 per cent in August seasonally adjusted, to $20.301 billion.

St George economist Janu Chan said the result supported other recent housing sector data, suggesting that people were beginning to return to the market, particularly owner-occupiers.

"There is a definite upward trend in owner-occupier housing," she said.

"That's certainly encouraging for the housing market, and is also in line with the stabilisation in house prices that we've seen in many states.

"There are however, some signs of weakness - investor housing is quite soft, suggesting that investors are still quite cautious about getting back into the market, despite the stabilising house prices."

JP Morgan economist Tom Kennedy said the housing finance data has been volatile lately, and is below the levels that were seen in 2009.

"It is quite lumpy and you are seeing a fair bit of payback in terms of how that data is flowing through over the months," he said.

"The headline figure, the 1.8 per cent increase, does follow the pattern that one month is strong and another is quite weak."

Mr Kennedy said we are yet to see a surge in new housing financing commitments after the interest rate cuts by the Reserve Bank of Australia in May and June.

He said the two factors that are not encouraging people to get new home loans is uncertainty over the European economy and its debt crisis and that the commercial banks have not been passing on the RBA rate cuts in full.

Mr Kennedy said today's figures are unlikely to affect the RBA's interest rate outlook and he forecasts one more interest rate cut by the RBA before the end of the year.

"I think at this stage the RBA is focusing their attention on the labour market," he said.