The eight month home loan downturn

By Kay Rivera | 12 Jul 2018

While consumers and investors alike are still taking in the general slowdown in the market, another noteworthy update was released by the Australian Bureau of Statistics in the form of the May 2018 housing finance figures. Referencing that data, the Real Estate Institute of Australia (REIA) reported that the number of loans for housing has continued to decline over the last eight months.

“Overall the figures for May 2018 show, in trend terms that the number of owner-occupied finance commitments decreased by 0.7% – the eighth consecutive month of decreases. If refinancing is excluded, in trend terms, the number of owner-occupied finance commitments decreased by 0.6% –the ninth consecutive month since an increase,” REIA President Malcolm Gunning said.

Declines were seen in all states and territories except Tasmania, where lending grew by .3%. The largest drop was seen in the Australian Capital Territory, which was down by as much as 1.9% in number of home loans.

The same direction was trailed by the value of investment housing commitments, decreasing by 1.9% in May. The dollar amount approved for house purchases by individuals for rent or resale also slumped to its lowest level since February 2016.

Further, the number of established home purchase commitments dipped by .6%, while the purchase of new dwellings diminished by .9%. The new dwelling construction sector did not perform any better, falling by 1.5% over the course of the period.

Gunning, meanwhile, pointed out the proportion of first home buyers, as part of the total owner-occupied housing finance commitments, remained unchanged in May at 17.6%.

“The continued decline in housing finance confirms the feedback from the market that the APRA restrictions and the fallout from the Royal Commission into Banking have resulted in an extremely cautious approach by lenders,” he said.  

At present, loan applications for real costs of living, including school fees and use of credit cards, are examined. At the same time, banks’ valuations are gauged using an “ultra conservative” approach, causing the loans made available to borrowers to be lower than their expectations.

“We need to ensure that lending approaches reflect the market rather than set the market which appears to be the case at the moment,” Gunning concluded.


Related stories:
Macquarie Australia Raises Its Home Loan Rates
RBA Keenly Monitoring Australia's Home Prices


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