Australia: Housing finance approvals surprisingly firm - Westpac

Australian housing finance approvals to owner occupiers edged up 0.5% in June, undershooting market expectations of a 1.5% gain, notes Matthew Hassan, Senior Economist at Westpac.

Key Quotes

“The detail was considerably more positive: approvals ex-refinancing posted a much stronger 1.9% gain to be up 3.4%yr with both the value of investor loans and construction-related loans also posting solid rises.”

“Note that the macro prudential tightening measures introduced in late March and associated increases in rates for investor and 'interest only' loans have likely given indirect support to owner occupier loan activity. That said, the value of investor loans was stronger than expected, posting a 1.6% gain to be up 5.7%yr. The total value of loans was up 0.8%mth – ex refi up 1.5%mth, 7.1%yr. The most recent round of mortgage rate increases for 'interest only' loans came through in late June and is likely to impact in Q3.”

“The owner occupier loan detail showed a continued surge in construction-related finance approvals – the number of finance approvals for construction up 3.6%mth, 8.9%yr and approvals for the purchase of newly built dwellings (which includes for settlement of ‘off the plan’ apartment purchases) up 3.5%mth, 10.2%yr. The latter is related to settlements on the massive wave of new high rise apartments now reaching completion. The lift in finance for construction however bears close watching – the rise is consistent with a recent firming in non-high rise dwelling approvals and although other indicators such as consumer views on 'time to buy a dwelling' suggest this will give way to a renewed weakening over the second half of the year, the links between homebuyer sentiment and new home building can often be loose.”

“The detail also shows a notable lift in first home buyer approvals – up 8.8%mth, 6.7%yr. Although the levels are still very low, this may be an early sign that the various increases in state government policy assistance for first time buyers in recent months may be generating some traction.”

“The state detail is of somewhat limited use as investor loans are not split out in this release. However for owner occupier approvals (ex refi) a dip in NSW (–3.1%) was offset by small gains across other states (Qld up 3.6%, Vic up 1.6%). Notably the lift in construction finance is coming across all major states.”

“Overall, the numbers will be disappointing for regulators looking for a more material slowing in investor activity although the full impact of macroprudential measures has yet to come through.”