The home loan market came off the boil in June with new loan commitments falling 1.6 per cent overall from record highs to $32.05 billion.
This was the first significant fall since May, 2020.
It was led by a 17.5 per cent decline in financing for the construction of new dwellings, which is now down almost 40 per cent since February.
Owner-occupier loans fell by 2.5 per cent from record highs, led by a continued unwind in the HomeBuilder-driven pull-forward in construction-related finance, and a further softening in first home buyer activity.
ABS head of finance and wealth Katherine Keenan said that while it was the largest fall since May 2020, owner-occupier commitments remained 76 per cent higher compared to a year ago and 64 per cent higher than pre-Covid levels in February 2020.
“The largest contribution to the fall in owner-occupier loan commitments was a fall of 17 per cent in the value of loan commitments for the construction of new dwellings,” Keenan said.
“In addition, there was no growth in lending for the purchase of existing dwellings.”
At a state level, Western Australia has the weakest result, down 5.8 per cent over the month, while Victoria was down 5.2 per cent and NSW down 2.4 per cent, the latter showing no apparent disruptions due to the recent lockdown.
The fall in construction lending follows a period of rapid growth between July 2020 to February 2021 in which the value of loan commitments rose by 150 per cent.
As well, the slowdown in overall lending follows a third consecutive monthly fall in dwellings approvals, which peaked at about $23 billion in March after an almost year-long climb from a low of $12.7 billion in June 2020.
Westpac senior economist Matthew Hassan said building approvals, up 56 per cent across the year in value terms, were now very likely to fall below their pre-HomeBuilder level.
“Construction finance approvals dropped 9.6 per cent in value terms and over 18 per cent in number terms,” Hassan said.
“There is likely more weakness to come.”
Despite this, demand from investors remained strong, with loans lifting 0.7 per cent in June to be double a year ago and at the highest level since early-2015.
Loans for renovations also lifted, up 7.4 per cent to a record $486.8 million.
AMP Capital chief economist Shane Oliver said first home buyer finance had continued to decline from its peak in January and had fallen back from 25 per cent of total finance in December to now be 19.7 per cent.
“While it led the charge higher, helped by various incentives and investors retreating on the back of tighter lending standards and weak unit rental markets, first home buyer demand appears to have peaked as the HomeBuilder incentive has come to an end,” Oliver said.
“Demand has been brought forward and worsening affordability is starting to bite.”
By value, first home buyer loan commitments accounted for 31.2 per cent of all owner-occupier commitments in original terms, excluding refinancing, in June.
First home buyers also took out larger mortgages during the pandemic, reflecting higher housing prices.
According to ME Bank, the average loan size for single mortgage applications has risen by 1 per cent to $405,755.
First home buyers now need an additional four months on average to save a deposit on an entry-level house, according to Domain.
Article Source: www.theurbandeveloper.com