This article is from the Australian Property Journal archive
DEMAND for housing finance has fallen in April for the third consecutive month, according to the latest Australian Bureau of Statistics data.
In April, the number of home loans issued fell 3.0% after falling 5.7% in March and 6.1% in February.
JPMorgan’s economist Helen Kevans said the number of home loan commitments has remained weak in the wake of the Reserve Bank’s back-to-back rises in interest rates in February and March, and the rise in domestic banks’ standard variable loan rates by more than, and outside of, the rise in the official cash rate.
Falls were recorded in the number of loans issued for the purchase of established dwellings (-3.5%) and the purchase of new dwellings (-1.3%), while loans for the construction of dwellings rose (+1.8%).
The number of owner-occupied housing commitments excluding refinancing slumped 5.8%, compared to 5.4% in March.
In value terms, home loans were also lower, falling 3.0%, owing to a 4.9% fall in owner-occupied lending. First home buyers, though, continue to suffer amid record low levels of housing affordability, and accounted for less than 17% of home loans in April.
“Surprisingly, given that investors appeared to have withdrawn from the property market in recent months, investment lending rose 1.4%, and investors accounted for 31% of total loans, the largest proportion since October last year, and notably higher than the 29% recorded in the previous month,” she added.
Kevans said demand for home loans will probably remain weak near term.
“Not only are borrowing costs high, but petrol prices are rising, and prices for food and other staple goods remain elevated. There is also a risk that domestic banks may raise their standard variable rates again outside of changes in the official cash rate which, given that variable loans account for around 80% of all loans, would weigh heavily on demand for housing finance.” she concluded.
The number of home loans fell in all states and territories, except the Northern Territory (+13.7%) and South Australia (+2.7%).
ANZ’s senior economist Ange Montalti said ongoing deterioration in housing affordability and caution among investors will see similar levels of finance being recorded in coming months, although further moderate downside would not surprise, particularly if expectations of an interest rate rise strengthen.
“Trend approvals at around current levels will translate into slower housing credit growth over the second half of 2008, providing some comfort to the RBA.
“That said, continued trend weakness in construction-related finance, suggests no inroads are being made into redressing the fundamental imbalance between demand and supply. This is likely to intensify the inflationary pressures that have only just started coming through higher rentals,” Montalti concluded.
Australian Property Journal
