Queensland demand for mortgages slows

Demand for housing finance from owner-occupiers in Queensland increased by 1.6% to 8,607 commitments in May, according to latest ABS figures.

The increase is below the national average of 4.4% and well below the increase of 7% (revised up from 6.2%) recorded in April.

After underperforming for much of the past year, SA housing finance bounced back in May, rising 8.2% in May.

Owner-occupier mortgage commitment gains were recorded in WA (3.6%), Victoria (2.6%) and NSW (2.2%).

The modest increase for the Sunshine State leaves it 12% below its end 2010 level.

According to Westpac economist Julie Doel, the May outcome for Queensland suggests the post-flood recovery will be protracted.

Across Australia, mortgage finance was arranged for 49,437 owner-occupier dwellings in May 2011 with a combined value, excluding alterations and additions of just under $20.5 billion – an increase of 2.9%.

Doel says the May outcome is in line with expectations. Westpac had forecast 5% growth in owner-occupier mortgages compared with market estimates of 4.5%. It follows a gain of 4.6% in April.

However, Doel says excluding refinancing activity, housing finance to owner-occupiers rose by just 1.1% in May, down from April's 3.0% gain.

“Despite the April/May gains, the level of housing finance remains relatively low, circa that seen in the second half of the 1990s,” she says.

The value of fixed investment loans increased by 4.4% to $6.3 billion.

The number of loans for the construction or purchase of a new dwelling rose by 5.7% in May on top of the 3.3% rise experienced in April.

“Hopefully new home lending is finally dragging itself off the canvas, although we need much more than May’s improvement to lift us from what is a chronically low level of new home lending,” says HIA senior economist, Andrew Harvey.