Australian housing finance commitments fell by more than expected in August, posting their steepest decline since May 2020 with key policy stimulus measures unwinding, demand cooling in response to the sharp rise in housing prices, and as the impacts of lockdowns in New South Wales and Victoria disrupted activity.
Housing Finance — August | By the numbers
- Housing finance commitments ($ value, ex-refinancing) fell by 4.3% m/m in August vs -2.0% expected (prior: 0.2%) — to $30.8bn, with annual growth moderating to 47.4% from 68.2%.
- Owner-occupier commitments contracted by 6.6% in the month (prior:-0.4%m/m) to $21.3bn, slowing growth over the year to 33.5% from 58.3%.
- Investor commitments lifted by 1.5%m/m (prior: 1.8%) to come in at $9.5bn, for annual growth of 92.2%.
- Total refinancing activity advanced by a further 3.2%m/m (prior: 6.0%) to $17.8bn (58.1%yr), led by the investor segment (11.5%m/m) as owner-occupiers declined (-1.0%m/m).
Housing Finance — August | The details
The owner-occupier segment drove the headline fall, with commitments down 6.6% on the month, for its steepest fall in 15 months. Within the segment, there were declines from upgraders (-7.1%m/m) and first home buyers (-4.1%), and the construction-related category (-4.7%) continued to reflect the unwind from the expiry of the HomeBuilder scheme.
Momentum in commitments to the investor segment has slowed over the past 3 months from the very strong pace of growth seen earlier in the year, but they still advanced in August (1.5%) and are at an elevated level at $9.5bn — its highest going back to 2015.
Activity in the first home buyer segment is continuing to retrace from its recent peak due to the unwind of policy stimulus measures and as concerns over affordability due to rising housing prices weigh, while lockdowns were also a headwind. Commitments to the segment declined by 4.9%m/m to $5.6bn, while the number of approvals made by lenders fell 3.0%m/m to around 12.5k.
Approvals to the owner-occupier segment were down across the categories in August, with upgraders -3.4% (22.2%yr) and construction-related -7.4% (5.2%). The latter is winding down from HomeBuilder, with approvals for newly-constructed homes -12%m/m and those to facilitate new builds -4.9%m/m.
Commitments at the state level and across the major segments are summarised in the table below. Lockdown impacts were weighing in New South Wales and Victoria.
Owner-occupier commitments are easing off their recent peaks in all states, but they remain at very high levels reflecting the boost from stimulus measures and rising housing prices.
Housing Finance — August | Insights
A sharper-than-expected pullback in commitments in August was driven by a combination of factors, including the runoff of policy stimulus, rising housing prices slowing demand, and the disruptions associated with state lockdowns in New South Wales and Victoria. Conditions might be cooling in the major housing markets, though they still remain very robust according to most indicators. Just today, CoreLogic reported that prices nationally were up another 1.5% in September, to be 17.6% higher than at the end of 2020. Earlier this week, the quarterly statement from the Council of Financial Regulators signalled that macroprudential measures were being considered.