Lending to both investors and owner-occupiers fell, although the fall in lending to owner-occupier first home buyers was much less than the drop in lending to owner-occupier non-first home buyers.

According to figures released by the Australian Bureau of Statistics (ABS), the total value of new loans fell 3.7% (in seasonally adjusted figures), following a 2.2% rise in February.

ABS Chief Economist, Bruce Hockman said “all components of new lending to households were weaker in March, more than offsetting a bounce in lending activity seen in February”.

“There were large falls in the value of lending for owner occupier dwellings in seasonally adjusted terms in both New South Wales (-5.7%) and Queensland (-5.3 %) in March, after rises in both states the previous month,” he said.

At a national level, the number of loans to owner occupier first home buyers fell -0.5% in March, and -10.3% from last year .

Mr Hockman said the value of new loans to investors also dropped, falling by 2.7%.

“Nationally, lending for investment dwellings also contracted further in March, with the series down 25.9% compared to March 2018. The level of new lending for investment dwellings is at its lowest level since March 2011,” he said.

Lending to households for personal finance, which includes car loans and personal loans, fell 11.2% in March.

J.P Morgan economist Tom Kennedy expects lending to continue falling.

“We expect (lending to both owner-occupiers and investors) to remain under pressure as more stringent lending standards make it harder to secure financing, while falling house prices and historically low rental yields limit the appeal of the asset class in general,” he said.

Westpac senior economist, Matthew Hassan said the March update was “weaker than expected”.

“Whereas the February report had suggested markets were finding a base, the March update clearly undermines that view,” he said.

“It (the March update) was disappointing given the improved tone from the auction market activity and an apparent slowing in price declines in recent months.”

But other economists, like National Australia Bank’s Kaixin Owyong, believe the unexpected lift in February was an aberration rather than the start of a new trend.

“There is little sign of stabilisation in the numbers and home loan approvals. The outlook remains for a continued downtrend, particularly for investor lending,” he said.

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