Overall housing finance is now at $1.268 trillion yet the number of home loan approvals fell in January, according to the latest figures from the Australian Bureau of Statistics.
ABS found the number of home loans approved in January fell 0.4% – seasonally adjusted – compared to the previous month, after a 1.9% drop in December.
In trend terms, the number of owner-occupied finance commitments decreased by 0.1%, after an increase of 0.1% in November and a flat December.
This is the first decline, in trend terms, in the owner-occupied market for the last twelve months to January.
But if refinancing is excluded, the number of owner-occupied finance commitments increased, in trend terms, in January by 0.2%.
Increases were recorded in New South Wales, Queensland and Western Australia, with Queensland having the biggest rise, up 0.6%. The Australian Capital Territory’s fall of 1.6% was the country’s largest and South Australia remained flat.
Real Estate Institute of Australia president Peter Bushby said the January results highlight the need for all governments to act on housing affordability.
The proportion of first home buyers in the number of owner-occupied housing finance commitments rose from its historically lowest point of 12.3% in November to 13.2% in January.
But Bushby said despite the increase, it is far lower than the long-run average proportion of 19.9%, even with eight interest rate cuts since November 2011.
However, Housing Industry Association economist Diwa Hopkins believes the higher amount of first home buyers is a promising sign.
“The number of loans issued to owner occupiers for new homes is at its highest level in four years. Lending for new investment property declined in January, however this follows five months of strong results in this category of housing finance… We wouldn’t be discouraged by this development and it is actually in line with our forecasts.”
The fall in the number of home loan approvals shows the national economy remains fragile and the Reserve Bank of Australia should maintain its interest rate holding pattern, said John Kolenda, managing director of broker network 1300HomeLoan.
“Demand for home loans remains flat and the longer the RBA
maintains its cash rate at the record low of 2.5% the better, as this has at least provided much needed stability for consumers.
“The big issue for the RBA
will be how it deals with this situation as any premature increase in official interest rates is likely to change consumer sentiment back to being conservative,” he said.