The value of Australian housing loans just fell to a multi-year low

Michael Hurcomb/Corbis via Getty Images
  • The value of Australian housing loans fell to the lowest level since January 2016 in August.
  • Lending to owner-occupier loans fell by 2.7% to $20.568 billion, the lowest total since April 2017. Lending for investment purposes slid 1.1% to $10.099 billion, the weakest since August 2013.
  • The decline largely reflects the impact of tighter lending standards, falling home prices, lower turnover levels and less demand for finance.

The value of home loan lending in Australia fell again in August, the latest in a long line of housing indicators that have weakened in recent months.

According to the Australian Bureau of Statistics (ABS), the value of housing finance fell by 2.1% to $30.667 billion after seasonal adjustments.

It was the lowest monthly total since January 2016 and left the decline in finance over the past year at 10.1%, the steeped since October 2010.

The value of owner-occupier loans fell by 2.7% to $20.568 billion, the lowest total since April 2017. From a year earlier, lending to this cohort fell by 3.9%, the largest decline since November 2016.

Excluding the refinancing of existing owner-occupier facilities, the value of new lending slumped by 3.9% to $14.124 billion, the smallest monthly total since February 2017.

From a year earlier, the value of lending slumped 7.9%, the steepest annual drop in close to two years.

Refinancing of existing loan facilities inched up 0.1% to $6.444 billion, leaving the change on a year earlier at 6.2%.

Lower turnover in the housing market, along with the impact of falling home prices in many parts of the country and tighter lending standards towards high debt and loan-to-income borrowers likely explains the slide in owner-occupier lending.

Mirroring the trend seen in owner-occupier loans, lending for investment purposes also fell, sliding 1.1% to $10.099 billion in seasonally adjusted terms.

The monthly total was the smallest since August 2013, leaving the decline over the past year at a mammoth 20.5%, the largest since April 2016.

Now, like then, the steep decline reflects the impact of tighter lending standards introduced by Australia’s banking regulator, APRA, in late March 2017, limiting the proportion of interest-only loans to just 30% of total new loans issued.

Interest-only loans were typically favoured by housing investors.

Price declines in Sydney and Melbourne — markets that were previously dominated by investors — have likely amplified the decline in loans for investment purposes.

Mirroring the decline in values, the number of owner-occupier loans issued slipped by 2.1% to 51,266 in seasonally adjusted terms.

Loans to purchase existing dwellings fell by 1.8% to 43,102, outpaced by a far larger 6.2% drop in loans to build new dwellings which slumped to 5,506.

The steep fall in the latter category mirrors recent steep declines in Australian building approvals, particularly for apartments.

Loans to purchase newly-completed dwellings managed to buck the broader trend, lifting by 0.3% to 2,659.

As a proportion of total owner-occupier loans, those going to first-time buyers stood at 17.8% in non-adjusted terms, down from 18% in July.

The average loan size for this cohort stood at $345,000, below the $406,900 average for those not purchasing their first home.

The ABS does not release loans issued for investment purposes as part of the housing finance release.

“Ongoing credit tightening and out of cycle mortgage rate increases are still weighing on the market,” said Daniel Gradwell, Senior Economist at ANZ Bank. “Housing finance will remain weak.”

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