Building approvals likely continued to improve in April, ahead of a central bank interest rate hike in May, economists say. Economists expect building approvals lifted one per cent in the month, following rises of 2.2 per in March and in February. ANZ economist Amber Rabinov said prior to the Reserve Bank of Australia's (RBA) rate increase, there were positive signs in the housing sector, with building approvals having increased 4.7 per cent since January. "Partly reflecting this optimism there were modest house price gains across the nation in the March quarter, with the exception of Sydney, and strong growth in finance approvals over recent months," she said. "In April we expect building approvals to improve one percent, taking the year growth to negative 2.9 per cent." ABN AMRO analysts said approvals for houses likely rose solidly in April, while unit approvals could retreat due to an overhang of supply in the market. "Leading indicators of house approvals suggest that a recovery in this segment of the market may have been emerging before the rate hike, with housing finance, HIA home sales and auction clearance rates all heading higher," they said. "Looking further out, however, higher rates are likely to have a restraining effect on this recovery." The RBA lifted the official cash rate a quarter of a percentage point to 5.75 per cent - the first rate move in 14 months. AMP Capital senior economist Bob Cunneen said higher rates are likely to dampen the housing recovery going forward. But he is also cautious about the April result and has forecast a flat result. "Housing construction is starting to stabilise and come out of the slowdown, but I don't think it will accelerate in a big way," he said. "What has been a concern are interest rates, which held back housing construction in the first half of this year," Mr Cunneen said. "Overall, housing construction is due for a recovery but it will probably (not be until) the second half of this year and into 2007." SOURCE: AAP