Housing Finance - Loans for New Dwellings Hit Hard

  • Lending to buy dwellings continued to slide in January. This leading indicator suggests the downturn in dwelling prices has further to run.
  • The number of loans extended to owner occupiers (including refinancing) dropped 2.6% in January to 47,407, which is the lowest level since February 2013. Excluding refinancing, the number of loans extended to owner occupiers fell by 1.2% in the month and were down 14.7% on a year ago).
  • There was weakness across all categories, but lending to owner-occupiers for new dwellings was hardest hit in January. This category fell 9.5% in January, which is the biggest monthly decline since October 2008, and on a year ago was down 27.6%.
  • In value terms, the weakness in lending was also prevalent. Total lending values to both owner occupiers and investors (including refinancing) dropped 2.7% in January and by 18.2% in the year to January. This annual contraction is the largest since November 2008.
  • Weakness in the housing market remains a key downside risk to the economic outlook, particularly in terms of the negative wealth impact on consumer spending. 
  • We expect the Reserve Bank will need to cut the cash rate later this year to provide support to economic activity.

 

Please see the attached report for more information.

 



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