Home loan demand resumes downward trend

May 14, 2019

Home loan demand fell further in March, according to new data from the Australian Bureau of Statistics (ABS).

The latest Lending to households and businesses data from the ABS reveals that, in seasonally adjusted terms, there was a reduction in the number and value of loans to owner occupiers in March, following an unexpected improvement in February.

According to the ABS, 47,014 home loans to owner-occupiers were approved throughout March – a reduction of 2.5% on the month prior and 11.3% weaker than March last year.

“The ABS revealed a modest gain in home loan demand in February, supported by an increase in the value of investor loans, however the March data shows home loan demand reverted to its downward trajectory and suggests February’s results may have been an anomaly,” said Mortgage Choice Chief Executive Officer Susan Mitchell.

Ms Mitchell said today’s ABS data is supported by data from CoreLogic, which revealed that property prices continue to trend lower, albeit at a slower pace relative to the previous quarter.

“Throughout March, national dwelling values fell 0.6% and 0.7% across the combined national cities according to CoreLogic’s Hedonic Home Value Index.

“The decline was led by Sydney and Melbourne, which recorded dwelling value falls of 0.9% and 0.8% respectively.

“These market conditions are reflected in the ABS data, which revealed that the value of home loans to owner-occupiers, including refinance, was $18.57 billion, down 2.7% from the month prior,” said Ms Mitchell.

According to CoreLogic’s March Quarterly Economic review, investors as a proportion of housing market activity are well below average.

Ms Mitchell said, “Investment activity has significantly reduced in recent times, however the outcome of Saturday’s federal election could result in an uptick in investor demand between now and January 1st 2020, when Labor’s proposed changes to negative gearing and capital gains tax are due to come into effect. 

“That being said, a number of factors will continue to put downward pressure on home loan demand for owner-occupiers and investors over the-long term.

“The ABS data revealed an increase in the number of commitments to first home buyers on the month prior. It remains to be seen whether the Coalition and Labor’s proposed First Home Loan Deposit Scheme will have a marked effect on demand for loans to first home buyers, as the scheme will be limited to 10,000 borrowers a year but it could serve to put a floor under declining dwelling values.    

“Looking ahead, deeply ingrained stricter lending policy will continue to present a challenge to those seeking housing finance, and proposed changes to negative gearing and capital gains tax are likely to weigh on property investor sentiment over the long-term,” concluded Ms Mitchell.