Australian home loan lending resumes its slide

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  • The value of new home loans approved in Australia fell 3.2% in March, resuming the downtrend that was briefly interrupted by a small 2% increase in February.
  • From a year earlier, the value of new loans to owner-occupiers and investors tumbled by 15.2% and 25.9% respectively.
  • New monthly lending to investors has nearly halved from the record levels seen in 2017.

Australian home loan lending fell heavily again in March, driven by declines to both owner-occupiers and investors.

According to figures newly-released by the Australian Bureau of Statistics (ABS), the total value of new loans fell 3.2% to $16.937 billion after seasonal adjustments, leaving the decline on a year earlier at 18.4%.

The decline in March followed a smaller 2% increase in the value of new home loans in February, resuming the downtrend that’s now been in place for well over a year.


New lending to owner-occupiers fell 3.4% from February to $12.396 billion, reversing the 2.8% increase reported one month earlier.

‚ÄúThere were large falls in the value of lending for owner-occupier dwellings in seasonally-adjusted terms in both New South Wales and Queensland in March, after rises in both states the previous month” said Bruce Hockman, chief economist at the ABS, in an accompanying statement.

From a year earlier, the total value of new owner-occupier home loans nationally slumped 15.2%.

The ABS said total new loans to owner-occupiers fell 2.8% to 31,130 after adjusting for seasonal patterns, leaving the number down 13.8% from 12 months earlier.

Loans to purchase existing dwellings fell 3.3% to 23,513 during the month. Elsewhere, those to purchase newly-constructed homes declined by a larger 4.7% to 2,005.

New owner-occupier loans to build a new home managed to buck the broader trend, inching up 0.1% to 5,612 after seasonal adjustments.

“The number of lending commitments made to owner-occupier first home buyers recorded a relatively small fall — down 0.5% — compared to the fall in the number of lending commitments made to non-first home buyers which fell 3.3% in March,” the ABS said.

Mirroring the decline in owner-occupier finance during March, the value of new loans to property investors continued to fall, sliding 2.7% to $4.54 billion from a month earlier.

“Nationally, lending for investment dwellings also contracted further in March with the series down 25.9% compared to March 2018,” Hockman said.

“The level of new lending for investment dwellings is at its lowest level since March 2011.”

The value of new investor housing finance has now fallen 46.5% from the record levels set in 2017.

The decline in the value of new home loan lending to both owner-occupiers and investors reflects a variety of factors, including reduced turnover in the housing market, lower home prices, the impact of tighter lending standards and weaker demand at a time when property values are still 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,” said J.P. Morgan economist Tom Kennedy.

The weakness in investor lending may also reflect uncertainty over the upcoming federal election result, including flagged changes to the tax treatment of housing at the start of next year should the Labor Party take office following next Saturday’s general election.

“The fall in investor lending was first kicked off by changes by APRA to limit interest-only lending,” said Kristina Clifton, senior economist at the Commonwealth Bank.

“However more recently election uncertainty is likely to be weighing on investor sentiment.

“If elected, the Labor [opposition] is promising to remove negative gearing and halve the capital gains tax concessional on all but new residential property. This will be grandfathered for existing arrangements.”

While uncertainty over the election result will be resolved within the next week, with the value of both new owner-occupier and investor loans continuing to decline, Clifton says the surprise lift in lending recorded in February looks like it was an “aberration rather than the start of a new trend”.

Kaixin Owyong, economist at the National Australia Bank, expressed similar sentiment following the release of the latest housing finance data.

“There is little sign of stabilisation in the numbers and home loan approvals,” he said.

“The outlook remains for a continued downtrend, particularly for investor lending, as a number of off-the-plan apartments are completed and settled over the next year or two.”

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