The value of Australian housing finance commitments increased by 3.1% in March, rising to their highest level in 19 months at $27.6bn. Owner-occupier commitments lifted by 2.8% ($17.5bn) and investor commitments advanced by 3.8% ($10.2bn). As noted in today's release from the Bureau, the strong rise in commitments over the past year (17.9%) has reflected an increase in both loan volumes and loan sizes. Strong post-pandemic population growth is a key factor behind the demand for housing, outweighing the effects of higher interest rates and affordability concerns alongside an upturn in housing prices.
Commitments in March lifted by 3.1%, a stronger-than-expected rise (1%) while the prior month was revised up to a 1.9% increase (from 1.5%). The figure for March came to $27.6bn, its highest since August 2022 and up more than 19% from the cycle low in January 2023. This rebound has come alongside strong demand for housing generated by post-pandemic population growth and by rising housing prices; earlier in the week, the CoreLogic group published data showing that housing prices on a national basis have risen for 15 months on end since January last year, an increase of 11.1% over the period.
The upswing in commitments, however, slowed sharply over the first quarter of the year, rising by 0.5% compared to growth in the final two quarters of 2023 of 3.5% (Q3) and 6.7% (Q4). That increase in Q1 was driven by a 2.3% rise in investor commitments (to $29.5bn) as owner-occupier commitments declined modestly by 0.4% (to $51.2bn).
In the owner-occupier segment, the decline in commitments in Q1 factors in loan volumes that were broadly lower across the segment when compared with the previous quarter: upgraders -1.3%, construction-related -1.1% and first home buyers -2.8%, though this could partly reflect seasonal weakness (over and above what the ABS can account for).
Investor lending remains on the rise and lifted back above $10bn in March, a 22-month high. Very low vacancy rates as well as rising rents and housing prices are supporting activity in this segment.
Refinancing, down 2.5% in March, continues to unwind from its highs driven by the RBA's hiking cycle. Since reaching a peak of $21.5bn in July last year, the value of refinancing has retraced by around 25%.
