Australian housing finance down 1.6% in June

Australian housing finance commitments posted their first monthly decline since October of last year, falling unexpectedly by 1.6% in June. Commitments to owner-occupiers are coming down from record levels as stimulus measures are being wound back, while the investor segment cooled slightly with a slower rise in the month.

Housing Finance — June | By the numbers

• Housing finance commitments ($ value, ex-refinancing) fell by 1.6% in June against expectations for a 1.5% lift (prior month +4.9%), coming in at around $32bn. This saw annual growth paring back to 82.7% from 95.4%.  
• Owner-occupier commitments contracted by 2.5% to $22.9bn to be 75.9% higher than a year earlier. 
• Refinancing by owner-occupiers saw another strong lift to be up 9.5% for the month at $10.8bn (15.6%yr). 
• Investor commitments lifted by a modest 0.7% in June to $9.2bn (102%yr), touching its highest level since April 2015. 

Housing Finance — June | The details 

Housing finance commitments pulled back from a record high with a 1.6% fall coming through in June. This was the first month-on-month decline for commitments recorded in 8 months and aligns with the unwinding of policy stimulus measures, namely from the expiry of the HomeBuilder grants scheme and various home buyer incentives across the states. Owner-occupier commitments fell by 2.5%m/m to drive the overall decline but are still up by almost 76% on 12 months ago. It is a mixed picture within the segment; commitments to upgraders remain elevated but are now coming down for first home buyers. 

In the investor segment, growth in commitments have been running hot over recent months but were only modestly higher (0.7%) in June. As the chart below shows, the investor segment had been through a prolonged period of weakness prior to the COVID crisis. The stimulus measures which contributed to very strong conditions in housing markets and an upswing in housing prices were key to turning sentiment in the investor segment.  

Whereas the owner-occupier segment drove the turnaround early on in the cycle, investors have taken up the running more recently. For the quarter, investor commitments were up by 23.6% after a 29.4% surge in the 3-month period to March. This compares with a 5.4% lift in owner-occupier commitments in the current quarter following an 18.6% rise in the March quarter.  

The approvals data clearly highlights what is playing out in the owner-occupier segment. It shows the ongoing strength from upgraders as both the construction-related and first home buyer areas are unwinding with stimulus measures coming to an end. In particular, loans for new construction were down another 18.2% in the month to be a little more than half the level they reached during at the HomeBuilder peak. First home buyer approvals fell 7.8% in June to be 14.7% below their recent high.     

The table below summarises the developments across the states. From this, it can be seen the effect that the unwind from first home buyers is having on the owner-occupation segment as a whole. This is particularly pronounced in Victoria, Western Australia and Queensland.   

Housing Finance — June | Insights

The unwind in stimulus had a dampening effect on June's housing finance figures with loans for new construction and commitments to first home buyers easing from cycle peaks. Investor activity continues to rise but at a slower pace than in recent months. It remains to be seen the extent to which the lockdowns through July and into August could have an impact on activity in the housing market.