This article is from the Australian Property Journal archive
RISING interest rates will drag down new home sales and home commencements will slow “significantly” in the second half of the year as a result, and while owner occupier loan commitments rose in March they are still 25% lower compared to a year earlier.
Data from the Australian Bureau of Statistics for March showed the overall value of new loan commitments for housing rose 4.9% to $24.0 billion in March, down 26.3% year-on-year.
The value of total new owner-occupier loan commitments rose 5.5% to $16.0 billion, down 24.8% over 12 months, while new investor loan commitments rose 3.7% to $8.0 billion, down 29.2% annually.
The number of new owner-occupier first home buyer loan commitments lifted 15.8% during the month after hitting a five-year low in February, but are 22% lower year-on-year.
“During the second half of 2020, first home buyer lending reflected the strength in demand for housing during the pandemic, with new commitments peaking in January 2021 and declining by half since then,” said Mish Tan, ABS head of finance statistics.
The value of new owner occupier housing loan refinances between lenders rose 3.9% to another record high of $14.2 billion in March, as borrowers continued to switch lenders for lower interest rates as the Reserve Bank continued its interest rate hikes.
Meanwhile, lending for the purchase or construction of a new home remains at its lowest level in 15 years; stable in the month to be 30.7% lower than at the same time last year.
“The last time so few loans were issued for the purchase or construction of a new home was in November 2008, when the GFC caused a contraction in building,” said HIA’s chief economist, Tim Reardon.
“This data confirms that ongoing and significant declines in new home sales will see new home commencements slow significantly in the second half of 2023, under the weight of the higher cash rate.
“There are very long lags in this cycle and the full impact of the RBA’s rate increases are still to fully hit the housing market, let alone the broader economy.”
The RBA board shocked the nation on Tuesday when it resumed its rate hike, lifting the official cash rate by 25 basis points to 3.85%.
Reardon said the weak lending figures of March will not be apparent in other economic indicators until 2024, when the volume of homes under construction declines more markedly.
“Given these long lags, the RBA shouldn’t be waiting to see unemployment rising before pausing the increase in the cash rate,” he said.
Lending for renovations and to owner occupiers and investors increased marginally compared to the previous month.
“This pick up in lending is likely to be short-lived as the weight of interest rate increases continues to constrain confidence,” Reardon said.
