Overall lending growth in the housing market remained firm in March: Gareth Aird

Overall lending growth in the housing market remained firm in March: Gareth Aird
Overall lending growth in the housing market remained firm in March: Gareth Aird

The value of all housing-related lending increased by 0.9 percent in March and annual growth lifted to 5.3 percent.

The value of housing loans to owner-occupiers (excl. refinancing) rose by 1.7 percent and annual growth stepped up to 6.4 percent.

The value of loans to investors rose by 0.8 percent in March.

Total lending for dwelling-related construction lifted by 4.5 percent and has stabilised in trend terms over the past 4 months. 

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Overall lending growth in the housing market remained firm in March: Gareth Aird

Overall lending conditions in the housing market remained firm in March, consistent with both strong auction clearance rates and robust dwelling price growth. Key details below: 

Owner-Occupiers (O-Os): Lending growth to O-Os (ex-refinancing) by value 12 has risen for five of the past six months.

The monthly growth rate averages out at a solid 1.3 percent over that period. By number, however, a 0.5 percent fall was recorded 9 following a 0.8 percent contraction in February.

A small lift in the average loan size was posted. Surprisingly, the average loan size to O-Os has trended down since late 2016 despite dwelling prices firming. The anomaly is explained, in part, by the big influence that investors and foreign buyers have had on price growth in both Sydney and Melbourne. 

Investors: The value of lending to investors moved a little higher in March after a solid 5.7 percent contraction in February. It looks like growth in the flow of lending to investors has eased after accelerating markedly throughout 2016 as the RBA eased policy twice. Notwithstanding, lending growth to investors was 14.2 percent higher through the year in March.

We expect to see lending growth to this segment moderate in coming data prints as some tightening in lending conditions to investors has an impact on the flow of credit. We do note, however, that the national auction clearance rate firmed on the weekend to 76.2 percent on stronger volumes. This suggests that there is still a fair bit of positive momentum in the property market. 

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Overall lending growth in the housing market remained firm in March: Gareth Aird

Construction: Total lending for dwelling-related construction has broadly tracked sideways over the past four months. There is still plenty of residential construction to come. Commencement and completions will remain firm throughout 2017 which will help to boost the supply of new dwellings. Lending for alterations and additions lifted in March and has been trending higher. This is consistent with other indicators that show renovation activity is lifting 

States: The data on O-O loans by State showed that annual growth in the number of loans has tracked broadly sideways in NSW, Vic and QLD. The number of loans to O-Os in WA continues to trend lower. An update on lending to investors by State will be in Wednesday’s Lending Finance release.

First home buyers: The number of loans to first home buyers posted a big 20.5 percent lift in March. Notwithstanding, first home buyers accounted for just 13.6 percent of all O-O dwellings financed over the month which is very low by historic standards.

Note that the March housing finance figures predate APRAs latest round of measures to mitigate risks in the mortgage lending market (announced 31 March). 

Gareth Aird is economist at Commonwealth Bank and can be contacted here.

 

 

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First Home Buyers Home Loans

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