Housing Finance — September | By the numbers
- Housing finance commitments to owner-occupiers fell by 1% in September, in line with the market forecast, to 50,673 (August -2.2%) to be down by 9.7% across the year
- The total value of housing finance committed in September to both owner-occupiers (excluding refinancing) and investors fell by 3.7% (August -3.9%) to $A23.008bn, which is a decline of 14.2% over the year
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Housing Finance — September | The details
Looking across the segments, the weakness was broad-based. The value of lending to owner-occupiers fell by 4.3% in the month to $13.257bn — the weakest level since September 2016 — and has fallen by 11.1% over the past year. For investors, lending fell by a further 2.8% in September to $9.75bn — its weakest since mid-2013 — representing an annual decline of 18.1%.
Lending to first home buyers fell by a sharp 9.7% in the month to $2.969bn, which is down by a more modest 2.8% on an annual basis. The value of refinancing commitments declined by 4.1% in September to $6.11bn to be little changed over the year (+0.6%).
Over the September quarter, the value of housing finance posted its 4th consecutive quarterly decline, falling by 5% to $71.757bn. This is the sharpest quarterly contraction since Q1 in 2010, while the aggregated level is the lowest since Q2 2014. The decline in the September quarter was almost identical in magnitude for owner-occupiers (-4.9%) and investors (-5.0%).
Finance approvals to fund the construction of property, or to purchase newly completed property, also continue to soften falling by 3.6% in September and by 16.5% on an annual basis. The decline has been sharper for approvals for newly constructed dwellings (-21%Y/Y) fitting with the slowing trend in recent building approvals data.
The state-level data provided some interesting detail. Approvals to owner-occupiers are falling fastest in Victoria, with falls of 4.3% in the month and 12.8% on the year. In New South Wales the declines were 1% in September and -10.1% annually.
For the other states, South Australia fell by 3.3% (-6%Y/Y), Queensland -0.1%m/m (-7.2%Y/Y) and Tasmania -0.9%m/m (+6.5%Y/Y). Western Australia recorded its 3rd consecutive monthly increase at 4.7%, though approvals are still down 9.2% on the year.
Housing Finance — September | Insights
With the continuing impact of tighter lending standards and property prices softening on a national basis, the demand for housing finance continues to slide. This is consistent with further declines in property prices, particularly in Sydney and Melbourne where owner-occupier finance approvals have fallen heavily over the past year — though, this will also help to improve affordability in those cities.
With further property price declines likely, the key risk to the real economy is the extent to which consumer spending may be negatively impacted by declining wealth. The Reserve Bank of Australia has, in general, remained sanguine regarding those risks in their commentary, while also highlighting significant uncertainty around their outlook.
