Australian housing finance rises 5.5% in March

Australian housing finance commitments lifted by 5.5% in March after the cyclical upswing took a momentary pause in the month prior. Commitments to the investor segment led the way in March (12.7%) and over the quarter (25.9%), though activity from owner-occupiers remains very strong. 

Housing Finance — March | By the numbers

• Housing finance commitments ($ value, ex-refinancing) advanced by 5.5% in March to $30.23bn after a brief pause in February (-0.3%). Growth in commitments over the year lifted to 55.3% from 49.1%. 
• Owner-occupier commitments lifted by 3.3% to $22.41bn, more than reversing a 1.8% decline in the month prior, to be up 55.6%yr.  
• Refinancing by owner-occupiers steadied in March (0.6%) at $8.6bn (24.7%yr) after posting three consecutive monthly increases of 11%. 
• Investor commitments surged higher by 12.7%m/m to $7.81bn, recording its strongest monthly rise in the 10-month period of the reopening-driven upswing. This accelerated annual growth to a 17-year high at 54.3%. 

Housing Finance — March | The details 

After taking a temporary pause in February, housing finance commitments pushed higher again with a 5.5% lift coming through in March. A range of policy stimulus measures have combined to drive the underlying value of commitments (ex-refinancing) up by 88% from the pandemic-lockdown low of May last year. As the economy reopened and stimulus measures were enacted, owner-occupiers led the upswing as commitments to the segment lifted by 24.5% in Q3 and 16.6% in Q4, which compared to gains of 11.6% and 14.3% respectively for investors. But in the March quarter, we saw a shift in the trend as investors (25.9%) took up the running from owner-occupiers (18.9%). Confidence by investors was hit severely by the onset of the pandemic as rents declined and vacancies elevated but the strength in the segment is clearly an indication of the improvement in conditions. 

Approvals made to owner-occupiers were driven by the 'upgrader' segment with approvals there rebounding by 7.7% in March after a 3.2% decline in February. First home buyer approvals appear to be on the way down after falling for a second consecutive month, with a 3.1% decline in March coming on the back of a 3.3% decline in February. Construction-related approvals were down 12.3% overall in March as the deadline for accessing the HomeBuilder scheme approached, though approvals of this type stand 98.4% higher than a year earlier with the scheme ensuring there is now a long pipeline of residential construction work in place to support the economy. 

For the states, of note was the strength in the New South Wales across all segments in March. Owner-occupier commitments there lifted 8.2%m/m, with first home buyers up 12.8%m/m, and investor commitments advanced by 13.0%m/m. But over the March quarter, the main theme was the pick-up in activity in Victoria after its upswing was delayed by the second lockdown. The strongest rise occurred in the investor segment (45%q/q), while there were also very strong gains for owner-occupiers (36%q/q) and first home buyers (33.1%q/q).

  

Housing Finance — March | Insights

Australian housing finance activity found renewed strength in March, with the investor segment driving the increase. House prices recorded another strong month-on-month gain in April according to the latest data from CoreLogic released yesterday. However, Friday's private sector credit data showed that despite the upswing in demand, growth is still moderate and is much stronger in the owner-occupier segment than for investors, suggesting that the regulators may be comfortable in monitoring conditions for a while yet. Activity in the first home buyer segment has likely seen its peak for the cycle, particularly with affordability concerns being evident in the Westpac-Melbourne Institute's monthly consumer sentiment surveys of late.