Australian housing finance posts its strongest monthly rise in 2 years

The value of Australian housing finance commitments increased by 3% in October in its strongest monthly rise since September 2016. Meanwhile, the number of approvals made to owner-occupiers, excluding re-financing commitments, lifted by its most since July 2017 with a 2.2% increase in the month. This follows very weak outcomes from the past two months, which may, in part, reflect the impact of the application of stricter lending assessments slowing processing times.

Housing Finance — October | By the numbers  

• The number of lending commitments made to owner-occupiers increased by 2.2% in the month to 52,654, ahead of market expectations for a -0.4% fall (prior month: -1%). Commitments are down by 4.8% through the year (prior: -8.4%)

• The total value of lending commitments to owner-occupiers (excluding refinancing) and investors increased by 3.0% in October to $A23.773bn to be down by 11.3% in year-ended terms (prior: -4.2%m/m, -13.8%Y/Y)    

Housing Finance — October | The details

In terms of the number of commitments made to owner-occupiers in October (+2.2%m/m, -4.8%Y/Y), loans to purchase established dwellings increased by 2.2%, but have fallen by 3.7% over the past 12-months. 

Construction-related approvals lifted by 2.0% in the month led by loans for construction at 3.2%. Loans to purchase newly constructed dwellings fell by 0.6%. In year-ended terms, construction-related approvals are -10.1%, with loans for construction -5.4% and newly constructed dwellings -19.4%.

The ABS does not provide these details for the investor segment. Click to expand charts, below. 

By value, total commitments to both owner-occupiers (excluding refinancing) and investors increased by 3.0% in October to $A27.773bn. Across the segments in October; owner-occupiers +4.8% to $13.889bn (-4.8%Y/Y), investors +0.6% to $9.884bn (-17.9%Y/Y). These were the strongest monthly rises for owner-occupiers since February 2016 and investors since February 2018.   

Commitments to first home buyers lifted by 15.9% to $3.435bn (+5.3%Y/Y). The value of refinancing increased by 13.9% to $6.652bn (+7.0%Y/Y).  

For the first time since May, there was an increase in average loan sizes for both non-first home buyers (+0.7% to $396,800) and first home buyers (+0.2% to $338,900).

As stated earlier, loans to owner-occupiers nationally lifted by 2.2% in October, or by 1,134 in absolute terms, to 52,654. This result was largely driven by Victoria where owner-occupier commitments increased by 746 (+5.1%m/m) to 15,413 (-6.7%Y/Y), which looks to be mostly attributable to first home buyers (+17.6%m/m) reflecting the impact of state government incentives available to that segment and improved affordability following recent price declines.

Across the other states in October; New South Wales +0.3% (-7.8%Y/Y), Queensland +0.8% (-5.2%Y/Y), South Australia +7.1 (+4.0%Y/Y), Western Australia -0.4% (-7.3%Y/Y) and Tasmania +8.7%m/m (+16.6%Y/Y). First home buyers have contributed heavily towards activity in both South Australia and Tasmania over the past year. 

   

Housing Finance — October | Insights 

Though a surprising upside result today, it does follow weak outcomes from August and September. Housing finance commitments in both number and value terms remain sharply lower compared to the same point 12-months ago, which reflects the impact of tighter lending standards and also reduced demand with property prices having declined by 4.1%Y/Y on a national basis and by -5.3%Y/Y on a combined capital city basis according to CoreLogic's Home Value Index for November.