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Demand Slips for Aussie Home Loans as Buyers Exit the Market

Posted: October 14th, 2013 | Author: | Filed under: Australian Home Prices | Tags: , , , , , , , , | Comments Off on Demand Slips for Aussie Home Loans as Buyers Exit the Market

Demand Slips for Aussie Home Loans as Buyers Exit the MarketDemand for new home loans by owner-occupiers has slipped backward for the first time this year, first home buyers are deserting the market, official figures show.

The Bureau of Statistics Housing Finance data shows that the number of new mortgages to owner occupiers dropped by 3.9 percent in August to 49,912, seasonally adjusted. The value of loans to property investors held steady.

In the three months to August, the number of loans to owner occupiers for the construction and purchase of new homes rose by 0.3 per cent and was 13.3 per cent higher than the same period in 2012.

This included a 0.2 per cent increase in the number of loans for the construction of a new dwelling during the three months to August, with lending in this segment up 3.6 per cent compared with the same period of 2012. The number of loans for the purchase of new homes was 0.6 per cent higher in the three months to August ::::

Demand Slips for Aussie Home Loans as Buyers Exit the Market

“During August 2013, the number of loans advanced for the purchase and construction of new homes declined to 8,347 on a seasonally adjusted basis. This represents a slight decline on the previous month’s result and is a timely warning against complacency towards Australia’s housing market,” commented HIA Senior Economist, Shane Garrett.

However Mr Garrett cautioned that “Compared with twelve months ago, new home lending activity has increased markedly. However, growth has completely stalled over the past six months even though activity was already rather low by historical standards”

UBS economist George Tharenou believes uncertainty caused by the federal election was a key driver of the decline.

“I think you can see short-term blips in some of the data related to election uncertainty over the past few months,” Mr Tharenou said.

“But … post the election there’s been a material improvement in confidence, and I think that will be true too for the home loans market, where we’ll see a further acceleration in lending over the next few months because we have record low interest rates as the key driver.”

Despite the fall, economists at Deutsche Bank say the figures still point to a solid trend of rising home loan commitments, biased towards investors.

“Such a ‘story’ fits relatively well with the anecdotes out of the sector, namely solid demand in large part from investors, against a shortage of stock being reflected in high auction clearance rates and reasonable house price growth,” chief economist Adam Boyton said in a research note.

The proportion of loans to first home buyers fell to 13.7 per cent, the lowest level since April 2004. In July, Victoria was the latest state to cancel its grants to first-home buyers to buy existing homes.

“In such an environment it is the marginal buyer that gets priced out of the market, with the marginal buyer in housing typically the first home buyer,” Mr Boyton said.

The number of loans to build new homes rose in the month, up 2.2 per cent, the first home buyer exodus would also be consistent with rising house prices and a shortage of housing.

“The patchiness we continuing to see in areas of the home loans market means that another interest rate cut from the RBA before the end of 2013 is important in order to ensure that the market recovery fires on all cylinders. Current policy settings have proven to be insufficient to drive a sustained recovery in new home lending and a renewed focus on housing policy reforms is needed to copper fasten the recovery.” concluded Shane Garrett.

In August 2013, the seasonally adjusted number of housing finance commitments for both new and established owner-occupied housing increased in:

  • NSW +2.3 per cent
  • Victoria +2.2 percent
  • Tasmania +0.1 percent

Lending declined by:

  • 3.2 per cent in Queensland,
  • 8.6 per cent in South Australia
  • 1.3 per cent in Western Australia over the same period.

The Reserve Bank has been cutting the official interest rate for nearly two years in the hope of stoking activity in the housing construction sector.

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source: hia
source: ubs
source: deutschebank

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