FHB figures a black cloud over sunny home loan activity

by Mackenzie McCarty14 May 2013

Lending for new homes increased across nearly all categories during March 2013, according to ABS Housing Finance figures release yesterday, but there’s one notable exception: First home buyers.

Housing Industry Association (HIA) senior economist, Shane Garrett, says the general improvement is a ‘welcome’ sign.

"The latest housing lending figures point to a strengthening of this measure of market activity. Lending increased across nearly all categories, with the loans for construction and purchase of new dwelling up over 10% in the month. On an annual basis, this represents an increase of over 20%. This represents a very welcome lift in activity," he says.

However, Macrobusiness economist Leith van Onselen says, while the number of FHB mortgage commitments rose by 11% in March, they were down by -16% over the past year and were -32% below the 5-year moving average.

“Despite the modest lift in numbers, the proportion of total owner-occupied loans going to FHBs fell to -14.2%, which was the lowest reading since May-2004,” says van Onselen.

“The overall slump in FHB mortgage demand has been driven by New South Wales and Queensland, where the number of commitments remain just above the record lows set in January and have fallen off a cliff since FHB grants on pre-existing dwellings were removed in October 2012. Victorian FHB mortgage demand has also fallen quite sharply since mid-2012 (when FHB subsidies on newly constructed dwellings were removed), whereas Western Australia’s is in an uptrend.”

Over the long term, van Onselen predicts that rising home prices and falling FHB share will present potential ‘headaches’ for policy makers, who may soon come under pressure to arrest the slide in FHB demand and re-institute subsidies under the ‘false pretence’ of improving housing affordability.

But Garrett remains positive. Looking at lending to investors, finance for established dwellings has been rising fairly consistently, he says, with, for instance, the value of loans increasing by 6.2% over the three months to March 2013. However, he adds, investor lending into new dwellings fell sharply by 16.4% in the March 2013 quarter, although the overall profile appears to have followed a path of improvement since mid-2012.

In March 2013 the total number of seasonally adjusted loans to owner occupiers increased by 8% in NSW, 5.3% in South Australia, 5.3% in Victoria, 4.3% in Tasmania, 4.0% WA, 3.5% in the ACT.


  • by 1martym1 14/05/2013 10:10:08 AM

    I would like to know how they collect the FHB data. With no FHOG for existing homes in most states how do they know if a buyer is a first timer or not. Rely on bank data? Just saying we all know that if data in an application is not credit critcial it is often left out

  • by Geoffw 14/05/2013 11:06:43 AM

    There are at least 3 States offering bigger FHOG incentives for new dwellings and Nil for established homes. First Home Buyers can actually find better buys will established stock and are pushed out by the fact that they cant get the grant on these properties. Governments need to look at this.

  • by Phil Sampson 14/05/2013 11:37:46 AM

    I cannot beleive the narrow mindedness of these govt "initiatives", short term cost savings in the grand scheme of things. No wonder rents are going through the roof and will continue to do so. Great for the investor market, however the ability for a young family in NSW to own a home is virtually impossible unless they can afford and want to live in outer Western Sydney where all the land developments are. That's of course unless the young family has a spare $50 or $60K in their pocket...... and that's likely while they're paying ever increasing rent. This one's going to come back to bite...