Housing Finance — July | By the numbers
- Housing finance approvals to owner-occupiers (excluding refinancing) increased by 4.2% in July to 32,427 to easily surpass the market's forecast for a 1.5% rise (prior rev: +0.6% from +0.4%). Approvals are down by 8.7% on a year earlier (prior rev -13.5% from -13.6%).
- The total value of housing finance commitments (excluding refinancing) surged by 5.1% in the month to $A17.896bn (prior rev: +3.2% from +1.9%), with the annual decline cut from -17.2% to -11.8%.
Housing Finance — July | The details
In aggregate, the total value of lending commitments excluding refinancing lifted by 5.1% in July to $17.896bn. This was its strongest monthly rise in more than 4 years going back to March 2015. The annual decline fell from -17.2% to -11.8% to be at its slowest since July last year.
Across the segments, lending to owner-occupiers (ex-refinancing) posted a 5.3% rise in the month, its strongest monthly increase since August 2015, to $13.253bn, with the annual decline contracting from -14.4% to -8.3%. The investor segment saw a 4.7% rise in July, its highest month-on-month gain since September 2016, to $4.643bn, which saw the annual decline ease from -24.4% to -20.4%. The value of approvals made for alterations to existing owner-occupied properties fell by 2.7% in July to $270.4m to be down by 9.4% over the year.
In total, refinancing commitments increased by 5.5% month-on-month, its fastest monthly rise since February 2014, to $8.577bn but is down by 4.8% compared to a year earlier. Refinancing to owner-occupiers jumped by 6.3% in the month to $6.07bn (-5.2%Y/Y), while investor refinancing lifted by 3.5% to $2.508bn (-3.7%Y/Y).
In terms of loan approvals to owner-occupiers, the total level excluding refinancing was up by 4.2% in July, its strongest month-to-month gain since June 2015, to 32,427. This cut the annual decline from -13.5% to -8.7%. Approvals to purchase existing properties jumped by 4.9% to 24,866 (-7.2%Y/Y). Construction-related approvals lifted by their most in a year with a 2.0% rise in July that kept the annual decline at -13.2%. This was all due to a 10.7% surge in approvals to purchase newly constructed dwellings (includes those off the plan), which are now down by 9.8% over the year compared to -22.7% last month. Approvals to fund new construction declined by 1.6% in July (-14.6%Y/Y). The ABS does not produce approval estimates for the investor segment.
July's state-based details for all borrower types and segments are shown in the table, below. Owner-occupier approvals lifted noticeably in all mainland states in July. Meanwhile, lending commitments to investors increased in every state in the month; the last time this occurred was back in December 2016.
Housing Finance — July | Insights
There were early signs in this report of demand for housing finance responding to the passage of the federal election, the easing in APRA's guidance around credit assessment standards, interest rate cuts from the Reserve Bank of Australia in June and July (with further easing also possible) and rising buyer sentiment. Based on the recent flow of activity data for prices and auction clearances, further gains in housing finance approvals appear likely in the months ahead.