Housing Finance - Home Lending Shrinks Further

• Housing lending continued to contract in September both in terms of the number and value of loans extended. The underlying trend continues to show the declines are biggest among investors, loans for new dwelling purchases, construction-related loans and for lending in NSW and Victoria.
• All categories of housing loans are now some way off their peaks in the housing cycle. Investor loans are the furthest from their peak – 33.8% in value terms.
• The number of owner-occupier loans fell by 1.0% in September, which is the third decline in four months. The annual rate for these loans fell by 9.7% in September. The annual rates of decline for construction-related loans and loans for buying new dwellings are the biggest since April 2011 and March 2010, respectively.
• The value of all loans dropped 3.8% in September and by 11.5% on a year ago. This annual rate of decline is the largest in nearly 8 years. The falls are being led by big drops in investor lending.
• Today’s housing-finance data provides proof that the housing downturn has further to run. Other proof stems from the softening trends in pre-sales activity, auction rates, dwelling approvals and dwelling prices.
• Policymakers will be keeping a watchful eye on the housing market; the potential wealth effects from housing to the consumer pose downside risks to the economy. These downside risks are a key reason why we expect the Reserve Bank to not start a rate-hike cycle any time soon.

 

 

Please see the attached report for more information.

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