Home loan numbers rise 1.8% in August with strong bounce in new home lending: ABS

The number of owner-occupier home loan commitments rose by a better than expected 1.8% in August to 45,821 loans, according to the latest seasonally adjusted ABS figures.

That was from an upwardly revised 45,021 loan commitments in July and above economist expectations of a 1.5% monthly rise.

The increase in home loan commitments in August follows RBA cash rate cuts in May and June totalling 75 basis points.

"A modest upward trend in housing finance to owner-occupiers is now apparent. New lending trended 1.2% higher in August, a turnaround from modest trend declines over the first five months of the year," says Westpac.

"A greater number of FHBs are likely to enter the market over coming months, in what is the 'spring season', encouraged by improved housing affordability underpinned by lower interest rates. 

"With the RBA more concerned about downside risks to economic growth over the year ahead there will be increased focus on the strength of the housing sector upswing and the likely boost to housing construction activity. "

The number of mortgage commitments for the purchase of new dwellings rose by a strong 13.9% to 2,341 in August, according to the ABS.

The number of loan commitments for the purchase of established dwellings rose 1.3% to 38,238.

In value terms owner occupier loans rose 1.3% to $13.65 billion.

Total housing finance by value rose by 0.6%, seasonally adjusted, to $20.3 billion.

On a state-by-state basis, whereas WA was the only state to record a rise for July, strength was more widespread in August, noted Westpac.

"For August, gains were reported for NSW (3.3%), Tasmania (3.3%), Queensland (4.1%), as well as WA (1.2%). Victoria softened for a second month (-1.2% following -1.1%), representing a let down effect in the wake of state government changes to first-home buyer incentives," says  Westpac.

First-home buyers share of finance declined to 18.6% from 19.2% for July, but Westpac says this is likely to be a short-lived dip. 

Loans for investment purposes recorded a 0.8% decline for August.

Housing Industry Association (HIA) chief economist Dr Harley Dale says the 2.6% increase in total housing finance net of refinancing in August 2012 marked the sixth consectutive rise.

"That is encouraging, but the base for the recovery has to date been too narrow.

"A recovery in the number of loans to first time owner occupiers appears to be entrenching itself, but lending to the larger ‘trade-up’ owner-occupier market has been losing momentum since March.”

“On the new home front, lending for the purchase of new dwellings increased strongly in August, which is an encouraging result, although a flat month in terms of loans for construction was disappointing.”

“After posting a strong increase in June, the number of loans for the construction of owner occupied dwellings largely flat-lined in July and again in August.

"Meanwhile, lending for the construction of new investment properties has been trending down since March.

"Hopefully interest rate cuts together with policy initiatives in NSW and Queensland will see a sustained improvement emerge in these key construction lending figures,” says Dale.