Australian housing finance down 4.8% in April

Australian housing finance commitments recorded their sharpest decline in a single month in almost 5 years after falling by 4.8% in April. That result was driven by weakness in both the owner-occupier and investor segments.

Housing Finance — April | By the numbers

• In value terms, housing finance commitments fell by 4.8% in April to $18.567bn, with the annual pace slowing back to 11.2% from 17.5% in the month prior.
• Commitments to the owner-occupier segment pulled back by 5.0% to $13.707bn as the pace of growth over the year declined to 14.8% from 22.5%. 
• Investor commitments declined by 4.2% in the month to $4.86bn, with the year-on-year gain slowing almost 3 percentage points from 5.2% to 2.4%.

Housing Finance — April | The details 

The 4.8% fall in the value of total housing finance commitments was its sharpest monthly decline in nearly five years. Australia was in COVID-19 lockdown in April, though the ABS noted in their release today that these data mainly reflected loan approvals that had been submitted in March. As part of social distancing restrictions, public auctions and open house inspections were prohibited from late March through to May, so that effect may show up as further reductions in housing finance demand in the months ahead. 

  

In terms of approvals, loans approved to owner-occupiers to purchase existing dwellings fell by 6.3% in April to 18,665, which is their lowest level in around 8 years. Annual growth was driven well into negative territory falling from 0.7% to -5.0%. First home buyer approvals declined noticeably by 3.8% but were still up by 15.6% on a year ago. Construction-related approvals advanced by 1.4% in April, though they were coming off a weak couple of months. Loans approved for construction of new dwellings lifted by 2.9% (1.6%yr) and approvals to purchase newly built dwellings were almost flat at -0.1% (21.6%yr). At this stage, the ABS does not produce seasonally adjusted estimates for investor approvals.  

The table, below, provides a summary of the state-based details for commitments in value terms. Both the 'major two' states stood out with Victoria advancing across both the owner-occupier (3.0%) and investor segments (8.7%), and while New South Wales recorded declines they were of a milder magnitude than in the other states. 

Owner-occupier commitments across the states are shown in the chart, below, with the clear theme of strength being evident in New South Wales and Victoria against weakness elsewhere. 

In the investor segment, demand shows a more broad-based rollover with Victoria looking to be the only state holding up. 

Housing Finance — April | Insights

The upswing in housing finance demand that occurred from mid last year has shown signs of weakening in the past few releases and April's report remained consistent with that. Seemingly, this comes ahead of any significant COVID-19-related impact. That will likely become evident in the next few months to reflect the disruption to activity from social distancing and uncertainty in the outlook for the economy and the housing market in general.