July 11, 2019
Home loan demand fell further in May, according to new data from the Australian Bureau of Statistics (ABS).
The latest lending to households and businesses data (5601.0) from the ABS reveals that, in seasonally adjusted terms, there was a reduction in the value of loans to owner-occupiers and investors in May, with the number of loans to owner-occupiers remaining stable month on month.
According to the ABS, 46,600 home loans to owner-occupiers were approved throughout the month of May – a reduction of 0.1% excluding refinance and a reduction of 12.4% year on year.
Mortgage Choice Chief Executive Officer, Susan Mitchell said, “This decline in home loan demand is unsurprising when you consider the broader context of the macro environment at the time. Leading up to May, there was still a lot of uncertainty in the market in the lead up to the federal election, and property prices continued on their downward trend, albeit at a slower pace than in preceding months. With this in mind, I would not have expected to see an increase in demand from borrowers.
“Pleasingly, the ABS data revealed that the number of loans to first home buyers increased almost 20% over the month of May, and while the data showed there was a 7% decline year on year, the new data suggests that sentiment amongst first home buyers is improving.
“The reality is the conditions in the market are very attractive to those looking to buy their first home. Declining dwelling values coupled with historically low interest rates would no doubt be encouraging buyers to get their foot on the property ladder,” said Ms Mitchell.
The ABS data revealed that the value of loans to owner-occupiers fell 1.7% over May and the value of loans to investors fell 1% on the month prior.
Ms Mitchell said, “The data showed that the value of loans to investors, including refinance, have declined almost 28% year on year. While I expect to see no material uptick in this segment of the market in the short-term, the outcome of the federal election and consequent removal of the threat to negative gearing and capital gains tax concessions may encourage demand from investors going forward.
“Encouraging news from the regulator may also help to spur more home loan demand going forward. The Australian Prudential Regulation Authority announced in July that it would proceed with the proposed changes to its guidance on home loan serviceability assessments, allowing lenders to review and set their own minimum interest rate floor and utilise a revised interest rate buffer of at least 2.5%.
“Looking ahead, there appears to be light at the end of the tunnel for the property market as the ABS data supports other indicators that the housing market correction is stabilising. Home loan demand and national dwelling values have faced many headwinds since peaking in late 2017 but the outcome of the federal election and two subsequent rate cuts since this latest issue of data from the ABS could help paint a different picture for the property market going forward,” concluded Ms Mitchell.