Housing finance trends lower
THE housing finance release for August was weaker than the market had expected. The market forecast was for a 2.5 per cent fall in the month.
In the event, the number of loans to owner occupiers fell 3.9 per cent in August, following a 2.1 per cent rise in July. As a consequence, annual growth slowed significantly, from 15.6 per cent in July to 9.5 per cent annually.
Queensland was one of the worst performers.
And the lack of first home buyers in the market has been a major contributor to the weak figures overall.
Abstracting from the month-to-month volatility, monthly trend growth slowed to 0.6 per cent in August, down from 1.0 per cent in July and a 2013 peak of 2.5 per cent in April.
Looking at the component detail, the number of loans for the purchase of established and new dwellings fell 4.6 per cent and 4.0 per cent respectively in the month. Construction loans provided a partial offset, rising 2.2 per cent.
However, over the year, loans for the purchase of new dwellings are up 25 per cent and loans for existing homes are up around 9 per cent; in contrast, construction loans are up just 5.3 per cent.
Taking a closer look at established dwelling loan activity, refinancing activity fell a modest 1.0 per cent in August. As such, the number of loan commitments to owner occupiers ex- refinancing was weaker still at -5.3 per cent; that left the monthly trend pace at just 0.3 per cent. By state, the weakness was broadbased in August. WA and Queensland saw the largest declines, falling 5.2 per cent and 4.4 per cent respectively. Loan activity also fell around 2.5 per cent in SA and NSW.
The fall in Victoria was more modest at -1.0 per cent.
More broadly, the state detail continues to show that the eastern states are outperforming. The key to this outperformance has been upgrader and investor activity, spurred on by historically-low interest rates.
In contrast, first-home buyer (FHB) activity is weakest in the east. NSW and Queensland FHB activity has been historically weak throughout 2013; and in Victoria, activity fell away in August following changes to assistance in July. At the national level, the proportion of all loan commitments made up by FHBs fell a further percentage point in August to 13.7 per cent, the lowest level since April 2004.
The loan value data also highlights the substantial divergence between FHB activity and the rest.
Whereas loans to investors and upgraders are up 26 per cent a year and 20 per cent a year respectively, FHB loans are down 19 per cent a year.
Ahead of the August report, approvals were showing a clear response to lower rates.