The Australian housing sector is feeling some of the pressure from five successive rate rises from the Reserve Bank (six, if you include yesterday’s).
So far this week we have seen house prices down in September, again (reported yesterday), while new building approvals soared in August after July’s big slump and August’s housing finance slid again for the third month in a row.
The value of new home loan commitments fell 3.4% to $27.4 billion in August (seasonally adjusted), on top of July’s 8.5% fall, according to data from the Australian Bureau of Statistics (ABS).
The value of new home loans in August was nearly $6 billion, or around 17% under the all-time high of more than $33 billion in January of this year.
The fall came from a 2.7% drop in the value of new owner-occupier loans and a 4.8% fall in the value of new investor loans commitments amid the continuing impact of the series of rate rises from the Reserve Bank and mortgage rate increases from lenders.
“Although lending continued to fall from the high levels of June 2022, the value of loan commitments in August remained elevated compared to pre-pandemic levels,” the ASBS pointed out.
“Owner occupier loans in August were 36 per cent higher than February 2020, while investor loans were 70 per cent higher,” Katherine Keenan, head of Finance and Wealth at the ABS, said in Tuesday’s statement.
But the rate rises didn’t impact first home buyers with the ABS reporting that number of new loan commitments to owner-occupier first home buyers rose 10.4% in August to 9,258, the largest rise since August 2020, although the level remained well below the January 2021 high of 16,330 loans (when the home builder and first home buyer handouts were at their peak).
“Increased demand was seen across almost all states and territories, particularly in Victoria (up 11.9 per cent), Queensland (up 14.3 per cent) and Western Australia (up 13.9 per cent),” The ABS reported.
“Anecdotal feedback attributed some of the August owner-occupier first home buyer increased demand to the 2022-23 First Home Guarantee,” Ms Keenan said.
The rate rises however saw a rise in refinancing with mortgagees chasing interest rate differentials – a clear reaction to the rate rises from the RBA and banks.
The value of borrower refinancing of owner-occupier housing loans rose 2.8% in August to a new record high of $12.8 billion as “borrowers continued to seek loans with lower interest rates amid an increase in the RBA cash rate in August,” according to the ABS.
At the national level, the average loan size for owner-occupier dwellings (which includes construction and the purchase of new and existing dwellings) fell in August from $609,000 to $589,000, though it remained 23% higher than that seen in February 2020. Average loan sizes fell in every state, however rose slightly in both territories.
The value of new loan commitments for fixed term personal finance rose 9.5% (seasonally adjusted) in August with car finance jumping nearly 18%, more than three times the 5.2% rise in July and the big fall in June at the end of the financial year (which was odd as usually there is a rise in leases at the end of the financial year).
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Building approvals, on the other hand, showed a very different direction in August with a big, big rise thanks to a surge in approvals for non-private dwellings.
But the big rise was after a slump in July and again underlined the volatility in this statistical series which relies heavily on the timely processing and handling of applications and approvals by local governments and in some cases state development bodies or courts.
The ABS said the total number of dwellings approved jumped 28.1% (seasonally adjusted) terms to 17,497 following a 18.2% drop in July.
August’s figure though was still well short of the all-time high of 23,292 approvals back in March 2021 when the Morrison government’s HomeBuilder subsidy was about to expire.
Daniel Rossi, the ABS’s head of construction statistics said in the release that “Approvals for private sector dwellings excluding houses rose 99.1 per cent in August, with a sharp bounce back in apartment approvals driving the result.
“The strong upward movement in August follows a weak July result, which had the lowest number of other residential dwellings approved since January 2012.”
“Approvals for private sector houses rose 4.1 per cent in August, following a 0.8 per cent increase in July.”
Across Australia, the number of dwelling approvals rose in all states, in seasonally adjusted terms. Approvals rose in New South Wales (70.6 per cent), Victoria (19.4 per cent), Western Australia (13.6 per cent), Queensland (9.5 per cent), Tasmania (3.9 per cent) and South Australia (3.5 per cent).
The result in approvals for private sector houses varied across the states. Approvals rose in New South Wales (12.7%), Western Australia (8.9%), and Victoria (1.2%). In contrast, approvals for private sector houses fell in South Australia (4.5%) and Queensland (-0.1%).
The value of total building approved rose 23.5% in August after July’s near 15% fall.
The value of total residential building rose 28.5%, comprising of a 32.6% increase in new residential building and a 5.4% increase in alterations and additions.
The value of non-residential building rose 15.1% after falling 21.5% in July.
