Australia | Jun 09 2010
By Chris Shaw
Australian housing finance to owner-occupiers fell in April by 1.8%, the decline a little less than the 2.0% fall the market had been forecasting. The value of total housing finance commitments rose however, gaining 0.8% for the month.
Westpac had expected a decline of 2.5% in owner-occupier finance numbers, senior economist Andrew Hanlan noting the reduction of stimulus measures from the government and increases to interest rates have combined to dampen the demand for finance in the housing sector.
According to Hanlan, the impact on the owner-occupier segment of the market is material, thus creating an argument for the Reserve Bank of Australia (RBA) to pause on rates at least until the next inflation update.
This reflects his view the weakest aspect of the April data was related to finance for the construction of new dwellings. Lending to owner-occupiers in this segment declined 4.8% in April and is now down 30% over the past six months.
While a current strong pipeline of work means housing construction will enter an upswing over the remainder of 2010 and into early 2011, Hanlan cautions the prospect is for a moderation in activity over the course of next year.
On a more positive note, today's data show investors continue to return to the market as investor finance rose 1.8% for April. This means an increase of 39% in investor finance since the start of 2009, with most of the interest appearing to be in the established market rather than the development of new projects.
With respect to first home buyers, Hanlan notes finance approval numbers were broadly flat for the month. The total decline in this sector is 58% since last May. The April data did show a 0.1% increase in the proportion of first home buyers seeking approvals, ANZ Banking Group economist David Cannington noting this was the first increase in this measure since September of last year.
Finance numbers to upgraders were also broadly flat on an ex-refinancings basis, bringing the total decline to 13% over the past seven months. Hanlan suggests this reflects both some heat coming out of the first home buyer market and higher interest rates.
Cannington takes the view the weak approvals data for April mean the undersupply issue facing the Australian housing market will continue to support house prices for some time yet.
According to Cannington, the combination of recent volatility in global financial markets and the RBA looking set to keep rates on hold over the next couple of months sets the stage for the recent falls in housing finance to moderate over the next few months.
