Australian housing finance — measured in both dollar terms or the number of loans issued — is accelerating again.
And that’s before the latest rate cut from the Reserve Bank of Australia.
According to data released by the Australian Bureau of Statistics on Wednesday, the value of housing finance jumped by 2.3% to $32.041 billion in June in seasonally adjusted terms.
Lending to owner-occupiers rose by 1.8% to $20.793 billion.
Excluding refinancing of existing dwellings, lending increased by 2.5% to $11.785 billion. It was the highest monthly total recorded so far this year.
The value of refinancing edged higher, rising 0.3% to $6.94 billion.
In a sign that investors are returning to the market, or perhaps that banks are now willing to lend to this component again following a sharp deceleration in loan growth in the second half of 2015, the value of lending to investors surged by 3.2% to 11.785 billion.
The monthly total was the largest seen since August last year, and the fourth increase in the past five months.
The chart below looks at the dollar change in lending to both owner occupiers and investors. Though the value of lending to both categories remains below the levels seen last year, there’s now tentative evidence that it’s starting to accelerate again.
In year-on-year terms, the value of lending to owner occupiers, excluding refinancing, rose by 6.8%. At the other end of the spectrum, lending to investors fell by 13.1%, although this was far narrower than the 25.9% drop seen in the year to April.
As a consequence of the lift recorded in June, the value of loans outstanding to households swelled to $1.51 trillion, the highest level on record. Loans outstanding to owner-occupiers stood at $976 billion, again a record high, while those to investors rose to $533.7 billion, the highest level since September 2015 (the only reason this wasn’t a record was due to a reclassification of investor loans to owner-occupiers by some lenders in 2015).
Although a large figure — eye-watering to some — it must be remembered that the value of Australia’s housing stock, at least according to ABS estimates, is currently around $6 trillion.
As with lending in dollar terms, the number of loans issued to owner-occupiers, referred to as dwelling commitments by the ABS, rose by 1.2% to 57,609.
Commitments for the purchase of an established dwelling increased by 1% to 49,014. Elsewhere loans to purchase a new dwelling, or to build, rose by 2.7% and 2.1% respectively.
In original terms, the proportion of owner-occupier loans by first home buyers rose fractionally, increasing to 14.3% from 14.2% in May.
The previous months figure was the lowest level since April 2004.
The ABS stresses that first home buyers are defined as people entering the home ownership market as owner-occupiers for the first time, with first-time investors excluded from the data.
In other words, first-time buyers purchasing as an investment, rather than to occupy, are not captured in the data.
The ABS does not release figures on home loans issued to investors.
Australian financial markets were unmoved by the release, although there’ll likely be plenty of debate about the rebound the dollar value of lending, particularly to investors.
Earlier today the Westpac-MI consumer sentiment survey for August recorded a large increase in the gauge measuring whether now was a good time to buy a dwelling. From the beginning of the year, the survey’s separate house price expectations index has also risen by 26%.
The survey was conducted before and after the RBA cut interest rates on August 2, taking the cash rate to a record-low level of 1.5%.
It will be interesting to see if the sentiment expressed in the Westpac survey will act as a lead indicator in other housing data, including housing finance.