Conflicting opinions on the strength of housing lending strength: HIA & REIA

EXPERT OBSERVATIONS

Geordan Murray, a Senior Economist at HIA, said the home lending figures released by the ABS today show the number of loans to households building new homes grew modestly in May.

Overall housing finance commitments for construction and purchase of new homes grew in the month of May by a modest 2.3 per cent but remain 11.7 per cent lower than the same month last year.

The credit squeeze that emerged from mid-2018 has seen lending for the construction of new homes contract sharply.

This month’s data suggests that these conditions have started to ease.

The improvement in lending in May is stronger than we had anticipated and reflects an increased level of borrowing from first home buyers.

This is the strongest month of borrowing by first home buyers this year.

There has been an improvement in housing market sentiment in the weeks following the federal election.

When combined with the RBA’s rate cuts and easing of APRA restrictions, there is cause to be optimistic that lending activity could improve as the year progresses.

However REIA President Adrian Kelly believes the May 2019 Lending to Households and Business figures released today by the Australian Bureau of Statistics show the number of loans for housing, excluding refinancing, continues to decline, but at a slower rate.

Mr Kelly said, overall the figures for May 2019 show, in trend terms that the number of owner-occupied finance commitments, excluding refinancing, decreased by 0.5 per cent –the twenty first consecutive month of decreases and the lowest since August 2012.

The value of investment housing commitments, excluding refinancing, decreased by 1.5 per cent in May. This is down 27.8 per cent from a year ago and is at its lowest level since March 2009.

The number of loans to first home buyers increased by 0.8 per cent and is the highest since November 2018 whilst the proportion of first home buyers, as part of the total owner-occupied housing finance commitments increased in May to 18.8 per cent from 18.2 per cent in April.

Whilst the total number of finance commitments for May show a continuing, but modest, decline it needs to be remembered that the Federal election was held in the middle of the month with considerable uncertainty regarding the outcome and concern about changes to property taxation and its impact should there be a change in Government. 

With the post election boost in confidence in the real estate market as evidenced by higher levels of enquiry, two cuts in interest rates and changes in APRA’s requirements May will most likely mark the bottom of the lending cycle.