Rents set to rise as home lending drops

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Landlords are poised to see further increase in rents as the market slowdown continues to spook investors.

The value of new housing finance commitments fell in March according to the latest ABS statistics, dropping by 1.6% in trend terms and 0.1% in seasonally adjusted terms.

Loans for construction saw a 1.1% fall over the month and an 8.1% drop over the quarter in seasonally adjusted terms, while loans for the purchase of new dwellings saw a monthly rise of 2.4% but a quarterly drop of 20.1%.

Property investors continued to shy away from making purchases in March, with the value of investment housing commitments – in trend terms – seeing its second 1.3% drop in as many months.

“The loss of momentum in the housing supply reform process has combined with heightened interest rate pressure to deal a telling blow to new residential construction at the very time when a sustained boost to supply was the required outcome,” said HIA chief economist Harley Dale.

The HIA was particularly concerned by seasonally adjusted figures for the March quarter, which saw the number of owner occupier loans for new housing fall in all states and territories.

The ACT saw the biggest drop of 23.4%, followed by Victoria (17.4%), Queensland (14.9%), Tasmania (13.5%), the Northern Territory (12.1%), New South Wales (10.2%), South Australia (3.4%) and Western Australia (0.5%).

One positive sign however was the increase in the number of first home buyers taking on a mortgage, with their percentage of all owner occupied housing commitments rising from 14.9% in February to 16% in March.

This however is well below both the long-run national average of 20.1%, and the 27.1% figure seen just over a year ago, says the REIA.

“It is positive news that first home buyer numbers have increased (as a percentage of the market) but there is still a long way to go to see a healthy number. The RBA should not see this as a sign to increase interest rates next month,” said REIA President David Airey.

Do we need the pace of new house construction to pick up? Are property investors right to shy away from the market? Join the debate at

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