Independent analysis of Australia's macro economy

Thursday, October 11, 2018

Australian housing finance slides further in August

Australian housing finance data weakened further in August, as the broader themes of tighter lending standards and declining property prices continue to play out. 

Housing Finance — August | By the numbers  

  • New Housing Finance Approvals (by number) to owner-occupiers fell by 2.1% in August, which was more severe than the 1% decline forecast by analysts. Approvals from July were revised down from growth of 0.4% to a flat outcome. Approvals are now tracking 10.2% lower through the year, compared to -6.4% last month.  
  • By value, total lending commitments (ex-refinancing) fell by 2.7% in August to $A24.223bn, which is a sharp contraction of 13.6% in annual terms.
*Click charts for full-sized images

Housing Finance — August | The details

Looking across the detail, the overall decline in 'new' housing finance — excluding re-financing commitments — of 2.7% was mainly driven by weakness from owner-occupiers, where lending fell by 3.9% in August. Annually, lending to the segment fell by 7.9% — a notable deceleration from last month where the decline was 2.9%. 

For the investor segment, lending fell for the 6th consecutive month in August, this time by 1.1%, with the value of commitments falling 20.5% below the level from a year ago.     

Meanwhile, lending advanced to first home buyers also eased in August, with a 1.1% decline to be broadly flat across the year (-0.5%). Overall, activity in the segment appears to be moderating after a lift over the back-half of last year that was driven by government assistance measures in New South Wales and Victoria.    

The value of refinancing commitments was little changed over the month at $6.444bn, with annual growth of 6.2%.  

Construction-related finance approvals showed further slowing in August, which is not unexpected given the slowing in building approvals and activity data. Approvals for newly constructed dwellings were little changed in the month but are down 15.5% on the year. Meanwhile, the number of approvals to finance the construction of dwellings fell 6.2% for the month and the annual decline slowed from 7.7% to 13%, reflective of a weakening environment for pre-sales. 

Looking across the states, declining finance approvals for owner-occupiers were broad-based in August, with; New South Wales -1% (-13%Y/Y), Victoria -3% (-5.5%Y/Y), Queensland -4.8% (-10.3%Y/Y), Western Australia -0.3% (-18.9%Y/Y) and Tasmania -2.2% (+1.1%Y/Y). South Australia was the only state to see an increase, rising by 1.9% in August but are 2.9% down on the year. 

Housing Finance — August | Insights 

Overall, August's data was weaker than expected, but that is unlikely to be viewed as a surprise by policymakers and markets given the softness evident in other housing-related indicators, such as; property prices — both on the ABS' measure and CoreLogic's Home Value Index  auction clearances, building approvals and construction activity. As the tightening in lending standards continues to play out — logically resulting in restricting housing finance demand, as intended by regulators   further softening in property prices appears likely given the prevailing mix of conditions.