Owner occupier housing finance approvals down 0.77%: Westpac's Matthew Hassan

GUEST OBSERVER

Australian housing finance approvals to owner occupiers posted a smaller than expected 0.5% decline in Oct – industry data had been pointing to a 1-1.5% decline. 

The detail was on the soft side though. Ex refinance, the number of owner occupier loans declined 1.2%mth, more in line with expectations.

The value of investor loans also declined sharply by -6.1% to be down 13.8% since August and 9.7%yr – the value of loans in this segment are back at June 2014 levels. 

Given the regulatory restraint being applied to investor lending and the indirect spillover boost this appears to be giving to owner occupier loans, the best gauge of broader market conditions is the combined total value of loans.

This declined 2.7% in Oct (ex refi) to be off 5.6% in two months. Annual growth is still positive but at 4.4%yr is much weaker than the strong double-digit growth rates averaged over the three years to August and the slowest annual pace since August 2012. 

In effect the housing market slowdown that has been apparent in buyer sentiment and auction markets is now showing through more clearly in the finance aggregates.

The state detail in today’s release is for owner occupier loans only and as such provides little additional insight into relative state performances. The investor loan split on Friday will allow for a clearer assessment.

Details 
Owner–occupiers (no.)   -0.5%mth, 6.3%yr  
– ex-financing (no.)        -1.2%mth, 4.1%yr                                

Construction of dwellings (no.)   -0.4%mth, -9.7%yr        
Purchase of newly built dwellings (no.)   -1.6%mth, 8.9%yr                                

Value of loans:             

Owner-occupiers ($bn)  0.4%mth, 21.2%yr  
Investors ($bn)  -6.1%mth, -9.2%yr        
Total ($bn)  -2%mth, 8.4%yr
Total ex refi ($bn)  -2.7%mth, 4.4%yr  

Matthew Hassan is senior economist with Westpac.