Australian housing finance commitments posted their sharpest rise since late-2021 with a 4.8% rise coming through in May. Although the RBA's tightening cycle remains in train and its full effects are yet to hit, housing finance continues to move off the lows reached earlier in the year. Fundamental factors in the housing market appear to be taking over from interest rates as the main impulse to housing prices.
Housing Finance — May | By the numbers
- Housing finance commitments (ex-refinancing) saw their strongest increase in 18 months rising by 4.8% in May to $24.9bn (-20.5%yr).
- Commitments to owner-occupiers advanced by 4%m/m to $16.4bn (-20.2%yr).
- Investor commitments increased by 6.2% - their strongest rise in 24 months - to come in at $8.5bn (-20.9%yr).
Housing Finance — May | The details
For the second time in the past three months, housing finance commitments rose in value by more than 4%. This comes after a run of 13 consecutive monthly declines to February-23 amid an aggressive RBA rate hiking cycle. Increased commitments follow housing prices starting to turn higher, with tight fundamentals in the housing market appearing to dominate rising interest rates.
Owner-occupier commitments are starting to gain momentum after sustaining a peak-to-trough slide of 33.5% between April-21 to February-23. The 4% gain in May came on the back of widespread gains across upgraders (4.2%), construction-related (4.3%) and first home buyers (5.5%). The only area of weakness was alterations (-5.0%).
Investor commitments worked up to a 6.1% rise in May after a largely flat outcome in April (-0.2%) following on from March's 3.8% increase. The high point came in February-22 before 12 consecutive declines brought investor commitments to a trough of $7.7bn, a fall of 32.4% over the period.
Refinancing remains around record-high levels against the backdrop of the RBA's rate hiking cycle. Owner-occupier refinancing rose through $14bn for the second time in the past 3 months, while refinancing by investors was $6.8bn in May.
Housing Finance — May | Insights
May's report reflects the upturn in housing prices that has recently emerged. CoreLogic reports that since flooring in February, housing prices nationally have risen by a little more than 3%. That comes after a peak-to-trough decline of around 10% that commenced just before the first hike in the RBA's tightening cycle. Despite tighter financing conditions, supply/demand pressures appear to be driving housing prices higher.