Drop in housing commitments to dampen the economy

By Kay Rivera | 12 Nov 2018

The Australian Bureau of Statistics (ABS) disclosed that the value of investment housing commitments and number of loans for housing declined in September. As such, there is possibility that the economy will take the brunt of these slowdowns.

Delving into the data, the Real Estate Institute of Australia (REIA) reported that the latter sank by 0.9% in September, in trend terms. Further, the dollar amount approved for the purchase of dwellings by individuals for rent or resale dipped to the lowest level since July 2013 when prices were much cheaper.

The lower number of loans for housing, meanwhile, was evident in the number of owner-occupied finance commitments, which was down by 0.5% – marking the twelfth consecutive month of decreases.

However, if refinancing is excluded, it can be observed that the number of owner-occupied finance commitments slid by a lower 0.9%. Again, this is also the twelfth consecutive month since a rise.

Leading the slowdown were Victoria, New South Wales, Queensland and the Northern Territory. The largest loss of 0.9% was in Victoria. Western Australia, South Australia, Tasmania and the Australian Capital Territory, on the other hand, had slight gains, with the largest hike (1.8%) seen of in Western Australia.

Moreover, it was found that the number of established dwellings purchase commitments decreased by 0.4%. Purchase of new dwellings and new dwelling construction fell by 1.7% and 1%, respectively.

The proportion of first home buyers, as part of the total owner-occupied housing finance commitments bucked the trend, increasing from last month’s 17.8% to 18%. The number of loans to first home buyers, though, slid by 8.8%.

According to REIA President Malcolm Gunning, the gathered results imply that the market is in a bad shape.

“There is no bright spot in the latest figures with the continued decline in housing finance reflecting the slowing market, APRA restrictions which with hindsight were probably excessive, the fallout from the Royal Commission into Banking and concerns about changes to property taxation and its impact should there be a change in Government,” he said.

Gunning warned how a cooling housing market can hurt the country’s economy.

“Government and regulators should be very mindful of the impact that a lack of confidence in the housing market can have on the economy.”

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