Housing Finance — June | By the numbers
- Housing finance approvals to owner-occupiers (excluding refinancing) posted a 0.4% month-to-month rise in June to 30,894, though that was softer than the 0.5% lift expected by markets (prior rev: -0.3%). The decline in approvals over the year moderated to -13.6% from -15.0%.
- The total value of housing finance commitments (excluding refinancing) increased by 1.9% in the month to $A16.82bn (prior rev: -2.7% from -2.4%) to be 17.6% lower than a year earlier (prior rev: -20.9%).
Housing Finance — June | The details
For the first time since May 2018, lending to both the owner-occupier and investor segments posted monthly increases. Excluding refinancing, commitments to owner-occupiers lifted by 2.4% -- its strongest rise since February 2019 -- to $12.4bn, easing the annual decline from -18.2% to -14.8%. Commitments to investors excluding refinancing increased by 0.5% in June -- its first monthly gain since July 2018 -- to $4.4bn, which slowed the decline over the year from -27.7% to -24.8%.
The total value of refinancing commitments fell by 1.9% in June and by 7.5% through the year to $8.1bn. Within that result, refinancing from owner-occupiers declined by 2.9% in the month to $5.6bn (-7.8%Y/Y), while it lifted by 0.4% in the investor segment to $2.4bn (-6.7%Y/Y). Lending to the owner-occupier segment for renovation work increased by 2.7% to $278m, with the annual decline slowing to -8.8% from a low of nearly -34% last September.
Over Q2, lending to owner-occupiers fell by 1.7% and by 4.8% to investors, though as the chart (below) shows, the pace of the declines is reducing.
In terms of loan approvals to owner-occupiers, there was a 1.2% rise for approvals to purchase established properties (-13.7%Y/Y), which is in contrast to a 2% fall for construction-related approvals (-13.2%Y/Y), with loans for construction -2.3% (-8.7%Y/Y) and newly constructed dwellings -1.2% (-23.0%Y/Y).
The state detail for owner-occupier approvals was largely positive in June but still weak for Q2 overall; New South Wales +0.7% (-1.7% qtr), Victoria -0.6% (-1.7%), Queensland +0.3% (-3.7%), South Australia +2.0% (-4.4%), Western Australia +1.1% (-2.9%) and Tasmania +2.1% (-8.4%).
Approvals details are not produced for the investor segment, though the ABS does provide value estimates. Here, lending in New South Wales increased by 2.4% in June -- its first monthly rise since April of last year -- while Victoria (+0.6%) also posted its first month-to-month rise since February 2019. Investment lending fell for the other states in June.
The summary table, below, shows the full breakdown of results across the segments on a state-by-state basis in June and over the past year.
One area worth highlighting is a pick up in activity from first home buyers in New South Wales and Victoria that has occurred over recent months (see chart, below), likely reflecting some improvement in affordability conditions.
Housing Finance — June | Insights
There were early signs in today's report that the recent improvement in the activity indicators, such as auction clearance rates and prices, are starting to flow into the hard data. Consecutive interest rate cuts from the RBA as well as indications for an extended period of low or even lower rates (see here) and less onerous credit assessment criteria are likely to support further improvement in demand for housing finance in the months ahead.