Demand for home loans on the decline, ABS data shows

by Julia Corderoy13 Oct 2014
Official figures released on Friday suggest the heated property market may be correcting itself as housing finance is on the decline.

According to the Australian Bureau of Statistics, the total value of home loans fell from record highs in August, dropping 1.2% to $2.80 billion. This included decreases in the value of loans to both owner occupiers and investors. The value of loans to owner occupiers fell by 2% in August, while for investors it fell by 0.1%. 

Although housing demand is still at record highs, Craig James, chief economist at CommSec says the high cost of housing and expected boost to housing supply will start to dampen demand. 

“High prices are inducing some caution by those buying homes with the intention of living in them. And investor housing activity is also expected to soften as record approvals to build new homes eventually translate to more homes on the market for either rent or for sale,” he said.

“Housing is always a function of demand and supply and the coming lift in new supply will lead to slower growth of home prices and reduced interest by investors.”

The Real Estate Institute of Australia’s president, Peter Bushby, hopes this slowdown in housing finance, particularly the decrease seen in investor lending will curb the need for the Reserve Bank to step in. 

“The August 2014 lending figures indicate a very stable market with a slowdown in investor activity which should ease the Reserve Bank of Australia’s recent concerns over a surge in investor activity that has prompted discussion over the use of macro-prudential controls.”

“REIA believes any introduction of macro-tools at this stage would be premature and should only be introduced where there is systemic risk as macro-prudential reforms may give rise to unintended consequences for both non-investor buyers and investors alike, particularly outside of Sydney and Melbourne,” he said.

The data also revealed that the number of home loans to owner occupiers decreased in August, falling 0.9% (or 1.9% excluding the refinancing of dwellings). The share of first-time buyers in the market fell from 12.2% in July to a record low of 11.8% in August and the average home loan across Australia stood at a six-month low of $318,400 in August. However, this was still up 6.1% on a year ago.