Australian housing finance commitments lifted by 1.6% in March to defy expectations for a decline. Investor activity accelerated over the first quarter while owner-occupier commitments rebounded. With the RBA's rate hiking cycle now underway, housing finance is set to unwind from elevated levels.
Housing Finance — March | By the numbers
- Housing finance commitments ($ value, ex-refinancing) posted a 1.6% rise in March to come in at $33.3bn. The consensus forecast was for a 1.9% fall following February's 3.5% decline. Annual growth in commitments eased from 14.3% to 11.1%.
- Owner-occupier commitments firmed by 0.9%m/m to $21.6bn but are down 2.2% over the year.
- Investor commitments lifted by 2.9%, more than rebounding from a brief pause to the upswing in February (-1.1%), with the monthly level resetting to a new record high at $11.7bn.
- Refinancing activity was up 4.6% in the month to $16.4bn (28.2%yr)
Housing Finance — March | The details
Australian housing finance commitments (excluding refinancing) posted a 1.6% rise in March to $33.3bn, sitting just off their record high. Over the first quarter, lending commitments lifted by 6%. Investment lending (2.9%m/m) drove the overall increase in March and in the the first quarter (11.8%). Owner-occupier commitments lifted by 0.9% for the month and saw a rise over the first quarter (3.1%). The main themes during Q1 were: the acceleration in the strength of investor activity, while owner-occupiers rebounded from a lockdown-impacted second half of 2021.
In the owner-occupier segment, upgraders drove the Q1 rebound (4.2%q/q), more than offsetting weakness from first home buyers (-6%q/q) and in the construction-related area (-1.2%q/q).
In terms of approvals volumes, all categories in the owner-occupier segment saw declines. Construction-related approvals were down 3.4%q/q and first home buyer approvals fell by 10%q/q, consistent with the unwind from earlier stimulus measures. Approvals to upgraders declined by 1.4%q/q, so the pick-up in lending (4.2%q/q) was driven by rising house prices.
Since reaching their lows during the pandemic, investor lending has been on a long upswing rising in 20 of the past 22 months. Commitments to the segment are at record highs with accommodative financing conditions, rising house prices and tight rental markets supportive factors.
At the state level, investor lending surged in New South Wales (11.5%), Victoria (19.6%) and Western Australia (12%) in Q1. Owner-occupier lending rebounded in Victoria (6.5%q/q) and Western Australia (3.8%q/q) but was soft in the other states. Declining activity from first home buyers was a major factor behind this with large declines on the quarter seen in New South Wales (-8.3%), Queensland (-14.6%), South Australia (-9.4%) and Tasmania (-10%).
Housing Finance — March | Insights
Housing finance commitments lifted strongly over the first quarter, rising by 6% overall on the back of a surging investor segment, while owner-occupier lending rebounded from recent weakness that can be linked to deferred activity during the Delta lockdowns. The combination of an RBA rate hiking cycle and cooling house prices in the nation's two major capitals mean housing finance is set to unwind from elevated levels. Tight rental markets could keep investor activity strong for a while yet.
