Australian housing finance commitments rise 2.0% in October

Australian housing finance approvals and lending commitments lifted in October to be consistent with improving conditions in the established housing market. Commitments to owner-occupiers expanded by 2.2% to lead an overall increase of 2.0%, as the investor segment rebounded from a soft September to post a 1.4% rise.   

Housing Finance — October | By the numbers

• Housing finance approvals to the owner-occupier segment (excluding refinancing) lifted by 0.6% in October to 27,076 (prior +2.2%).  Approvals in annual terms fell by 1.0% compared to a near-flat outcome of -0.2% in September.   
• Total housing finance commitments by value (excluding refinancing) increased by 2.0% in the month to $18.214bn (prior -0.4%), with annual growth turning positive for the first time in 2 years at a 0.9% pace (prior -2.3%).   

Housing Finance — October | The details 

From this update forward, the ABS has shifted to a new methodology for this series and thus there have been significant changes from what was reported previously. Overall, total lending commitments (excluding refinancing) lifted by 2.0% in the month (seasonally adjusted) to $18.2bn (0.9%yr). The owner-occupier segment lifted for a 5th straight month, rising by 2.2% in October to $13.1bn as the annual pace reached a 20-month high at 5.7%. Commitments to the investor segment expanded by a softer 1.4% pace in the month to $5.1bn, slowing the annual pace of decline from -14.0% to -9.7%.  

The chart, below, shows the annual pace of growth in total lending commitments and for the owner-occupier and investor segments. The impulse turned from mid-year as election-related uncertainty cleared and the RBA recommenced its easing cycle.  

Loan approvals to the ower-occupier segment were up by 0.6% in October to 27,076 but remained weaker through the year (-1.0%). Approvals to purchase established homes were broadly flat in the month (-0.3%), while loans for new construction (+5.5%) and to purchase newly constructed dwellings (+1.3%) lifted in October.  

Looking across the states, the value of lending commitments to the owner-occupier segment increased in the month in New South Wales (+5.8%) and Victoria (+3.4%), though there were declines in Queensland (-2.5%), South Australia (-3.4%), Western Australia (-3.0%) and Tasmania (-4.7%). As yet, seasonally adjusted estimates for the number of loan approvals across the states are not available.  

Housing Finance — October | Insights

Sentiment in the established housing market improved from mid-year, resulting in the near two-year downturn in national house prices coming to an end in the September quarter (see here) before rising further in the current quarter. Consistent with this, housing finance approvals and commitments have been in an upswing over the second half of 2019, driven by the owner-occupier segment.