Pullback in home lending points to plateauing market

author-avatar By on August 03, 2021
Pullback in home lending points to plateauing market

The value of new home loan commitments for owner-occupier housing fell 2.5% in June.

This was the largest fall in the value of owner occupier loan commitments since May 2020, down to $22.86 billion, according to Australian Bureau of Statistics' head of finance and wealth Katherine Keenan.

"Owner-occupier commitments remained 76% higher compared to a year ago and 64% higher than pre-COVID levels in February 2020," Ms Keenan said.

"The largest contribution to the fall in owner-occupier loan commitments was a fall of 17% in the value of loan commitments for the construction of new dwellings.

"In addition to this, there was no growth in lending for the purchase of existing dwellings."

This coincides with property price data released on Monday which showed a slight pull-back in price increases.

First home buyer loan commitments also fell for the second consecutive month, down 7.8% in June, back down to November 2020 levels.

"First home buyer lending fell across all states with the exception of South Australia, the Australian Capital Territory and the Northern Territory," Ms Keenan said.

"The largest fall was seen in Victoria where strength in first-home buyer lending tied to construction activity continued to unwind post-HomeBuilder."

Investor housing, however, increased slightly, up 0.7% on the month to $9.19 billion - 102% higher than a year ago.

No HomeBuilder and lockdowns make construction sector a sad panda

The ABS attributes the 17% fall in the value of construction loans written to the wind-back of the HomeBuilder scheme.

Building approvals data also released Tuesday shows a 6.7% fall in the number of dwellings approved in June, following a 7.6% fall in May and a 5% fall in April.

This was led by an 11.8% fall in private sector housing approvals, according to ABS director of construction statistics Daniel Rossi.

"Since the unwinding of stimulus measures, approvals for private houses have fallen 20.9% from the record high in April," Mr Rossi said.

"Despite the fall, private house approvals remain at elevated levels and are 44.3% higher than June 2020 and 37.6% higher than June 2019." 

Dwelling approvals rose only in Victoria (+12.8%), and South Australia (+8.6%). 

Private sector housing approvals fell the most in Queensland, down by more than a quarter in a month, followed by Western Australia, down by more than a fifth.

ANZ economists attributed some of the falls to lockdowns seen through NSW and other parts of the country.

"We expect NSW approvals and lending to moderate as a result of
lockdown, but the national numbers will be supported by strength in other states, given mortgage rates remain very low," they said.

"While house approvals are likely to weaken without HomeBuilder, ongoing low interest rates are likely to support housing finance for some time."

Westpac senior economist Matthew Hassan said the effects of lockdowns on lending and construction will "become more pronounced in the months ahead".

"[Declines] will be much harder to judge as we enter more substantial COVID disruptions in coming months and may not become fully apparent until lock-downs come to an end," Mr Hassan said.

"That said, we have been somewhat surprised by the resilience of auction markets during Sydney's extended lock-down."


Photo by Nick Jones on Unsplash

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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