‘Further cooling’ ahead for housing as annual credit growth hits all-time low

Dominic Beattie By on March 29, 2019
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Australian annual housing credit growth sunk to 4.2% in February, the lowest rate for records that date as far back as 1977.

That’s according to data released by the Reserve Bank of Australia today, which highlights the unprecedented nature of Australia’s current housing slump.

The 4.2% annual figure for February is slightly down from 4.4% in January 2019, but significantly down from the 6.2% it was in February 2018.

But monthly housing credit growth (seasonally-adjusted) in February was 0.28% – up from January’s 34-year low of 0.24%.

Following the release of this data, Westpac Senior Economist Andrew Hanlan said indicators point to further cooling of conditions for housing.

“House prices have declined (particularly in the Sydney and Melbourne markets) following a strong run, and dwelling approvals are also declining, down from historic highs, leading to a downturn in new home building activity,” Mr Hanlan said.

“New lending for housing is contracting, declining by 20% in 2018, with the second half of the year particularly weak, down 15%.

“Weakness has become more broadly based, including owner-occupiers. Lending to both investors and owner-occupiers fell by around 15% over the second half of 2018.”

Mr Hanlan said while tighter lending conditions were predominantly directed at property investors, the slowdown in lending to owner-occupiers has become more evident over the past year.

Annual owner-occupier property lending growth slowed down to 5.9% in February, which was the lowest since August 2015.

But annual lending to property investors all but stalled to 0.9%, which was another all-time record low.

Monthly seasonally-adjusted housing credit growth for owner-occupiers and investors in February was 0.24% and 0.04% respectively.

But while these figures are small, they still represent growth, unlike the figures for personal lending – such as car loan and personal loan lending.

For the fifth month in a row, personal lending shrank, a trend which some have attributed to the rise of ‘buy-now pay-later’ services such as Afterpay and ZipMoney.

It shrank by -0.09% in February, although this was significantly less than the slide of -0.66% it experienced in January.

For feedback or queries, email dominic.beattie@savings.com.au

Photo by Wilf Luck on Unsplash

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Dominic Beattie
Dominic Beattie is Savings.com.au’s Content Manager. He has been writing and editing articles on finance, business and economics since 2015, having previously worked as a Senior Journalist at financial research firm Canstar before helping to relaunch Savings.com.au in November 2018. Dominic aspires to help everyday Australians discover simple and effective ways to comfortably manage their finances and save money, without sacrificing their joie de vivre.
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