Home loan demand is on the decline

by Julia Corderoy10 Dec 2015
The demand for home loans dropped 0.5% in October, in another telling sign that the Australian property market has passed its peak.

The figures released by the Australian Bureau of Statistics (ABS) reveal that home loan demand dropped over the month after increasing by 2% in September. It is the first time the number of housing finance commitments dropped since May.  

Similarly, the total value of housing finance commitments dropped over October, declining by 2% over the month. This is largely attributed to another sharp fall in the value of lending to investors, which tumbled 6.1% over the month. This follows a decline of 8.5% in September and is the fifth consecutive month of falling investor lending.

The value of credit to owner occupiers increased marginally over October, up 0.4%. 

Not surprisingly, the drop in investor lending can be attributed to the recent regulatory tightening of property investment, according to the CEO of Mortgage Choice, John Flavell.

“This significant drop in the total value of all investment loans written would heavily suggest the recent changes we have seen Australia’s lenders make to their investment pricing and policy are now starting to filter through to the market and restrict investor demand,” Flavell said.

Over the coming months, Flavell said he wouldn’t be surprised to see the total value of investment lending continuing to head south. 

On the other hand, the Real Estate Institute of Australia (REIA) president, Neville Sanders, said the ABS figures reveal a positive trend for the owner-occupied market.

“Whilst investor activity is abating the lending figures show that owner occupiers continue to have a greater presence in the market,” he said.