Housing Finance — June | By the numbers
- Housing finance commitments (ex-refinancing) in value terms rebounded by 6.2% in June to $17.429bn after plunging by 11.6% in the month prior. Growth in commitments over the year lifted to 4.5% from 1.8%.
- Owner-occupier commitments recovered by 5.5% in June to $12.994bn after declining by 10.2% in May, while annual growth firmed to 8.7% from 7.3%.
- Commitments to the investor segment advanced by 8.1% to $4.435bn, which ended a 5-month stretch of declines, slowing the pace of contraction through the year to -6.1% from -11.9%.
- Refinancing commitments to owner-occupiers pulled back in June (-11.9%) to $8.899bn after a record increase in May (27.5%) and has surged over the past year (74.0%) with borrowers taking advantage of more competitive offers in the market.
Housing Finance — June | The details
A partial rebound in housing market activity occurred in the month of June following the easing of social distancing restrictions that had earlier prohibited open house inspections and public auctions. However, the 6.2% lift in total housing finance commitments (ex-refinancing) was modest compared to the falls of 4.8% and 11.6% in April and May respectively. Both the owner-owner occupier (5.5%mth) and investor (8.1%mth) segments participated in the rebound after substantial weakness, with owner-occupier commitments falling 14.7% over April-May and investor commitments plunging by 19.2% over the period. As a result, this left the value of housing finance commitments down 11.0% over the June quarter, with the owner-occupier segment -9.5% and investor commitments -15.1%.
Loan approvals (by number) to owner-occupiers to purchase exiting dwellings lifted by 9.7% in June to 18,618, though this followed steep falls of 6.3% in April and then -9.1% in May. Construction-related approvals showed a more muted response to the disruptions brought on by the pandemic and were little changed in rising by 0.3% in June. For the quarter, approvals to purchase existing dwellings fell by 9.6% compared to a 5.9% decline for construction-related approvals.
Turning to the states, the table (below) summaries the month-on-month and year-on-year changes to June. In a broadly positive tape, Victoria's underperformance was notable with owner-occupier commitments (-8.6%) extending May's decline (-6.6%). Investor commitments in the state did lift in June (+2.7%), but this was a very soft outcome considering that it followed a 21.3% fall in May. Clearly, housing market activity in Victoria will now see accelerated weakness in response to the reversal of its reopening, though the positivity in June's results across the other states should not be extrapolated too far forward given the increased uncertainty over the economic outlook and the path of the virus.
Owner-occupier commitments across the states are shown in the chart, below. For Q2, commitments were; New South Wales -7.1%, Victoria -6.4%, Queensland -14.9%, South Australia -5.8%, Western Australia -19.3% and Tasmania -9.3%.
The value of commitments made to the investor segment in each state is shown in this next chart. The detail for the June quarter was; New South Wales -13.7%, Victoria -9.6%, Queensland -31.4%, South Australia -12.5%, Western Australia -29.6% and Tasmania -21.6%.
Housing Finance — June | Insights
A partial rebound in housing finance demand came through in June to reflect the increase in activity after social distancing restrictions were eased. The sustainability of June's improvement is questionable given the headwinds from a stalling in Australia's reopening, of which Victoria is being most impacted by a resurgence of virus cases, increased uncertainty over the outlook from both a health and economic perspective, and the ongoing travel bans that will weigh on population growth dynamics.