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.