Housing finance resurgence continues in 2020: Matthew Hassan

Housing finance resurgence continues in 2020: Matthew Hassan
Matthew HassanDecember 7, 2020


The January housing finance report showed another robust broad-based gain, the total value of housing loan approvals surging 4.6%mth, above the consensus forecast of a 3%mth rise.

The upturn continues to be across both volumes and values – the number of owner occupier loans up 3.1%mth and up 11% from their low last May. The value of owner occupier loans is up 28% over the same period implying a sizeable 17% rise in average loan values.

Gains in the owner occupier segment have been across both upgraders and first home buyers, the latter showing a slightly stronger 20% in the number of approvals since May.

Investor activity also picked up but continues to show a more restrained upturn, particularly compared to previous cycles. The value of loans to investors rose 3.6%mth and is now up 22% from its May low but still 37% below its 2017 peak.

On a combined basis, the total value of loans was up 4.6%mth and 23%yr.

NSW and Vic continue to lead the resurgence, the total value of loans in NSW up +7%mth, +30%yr; and in Vic up 5.3%mth, 27%yr. The value of loans dipped 2% in Qld but is still up a solid 17%yr. WA and SA have seen more moderate 10% gains over the year.

Construction-related finance approvals showed a more convincing gain in Jan, loans for the purchase of newly built dwellings (including 'off the plan' purchases) posting a very strong 13.4% and construction loans up 4.2%. Overall, the picture continues to point to a clear turning point in non high rise building activity. The lift in purchases of newly built dwellings will also help high rise developers clear unsold stock but is less likely to drive a lift in new projects.

The finance figures confirm that the housing market was carrying strong momentum heading into early 2020. Auction markets suggest this has continued into February and early March. However, the worsening coronavirus shock will likely be a major disruption to activity in coming months.

MATTHEW HASSAN is a Senior Economist for Westpac

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