Home loan demand on the downswing

by Miklos Bolza13 Dec 2016
After a surge in home loan numbers in September, data from the Australian Bureau of Statistics (ABS) has found that overall demand fell slightly in October.
Looking at the seasonally adjusted estimates, 53,769 home loans were written in October, representing a drop of 0.8% from 54,191 written in the month before.
While he wasn’t surprised by this slight moderation, Mortgage Choice CEO John Flavell pointed out that total demand still remained high by historical standards.
“Over 53,000 home loans were approved over the month of October, which is a very strong result,” he said.
“Prior to May 2015, it was rare to see more than 53,000 home loans approved in one month. Furthermore, the total value of all dwelling commitments was more than $32 billion, which is another strong result.”
While the total value of all commitments dropped by 0.2% in October, this was driven mostly by a decrease in the value of owner-occupied loans which fell by 0.8%. In contrast, the value of all investment loans actually increased by 0.7% in the same time period.
Malcolm Gunning, president of the Real Estate Institute of Australia (REIA) said this upswing on the value of investment housing commitments was still lower than its 2015 peak – a direct result of the increase in mortgage rates for investors as well as the banks’ stricter non-price lending terms.
“The figures show that the market is adjusting and that there is no need for further intervention by the regulators”, said Gunning.
Shane Garrett, a senior economist at the Housing Industry Association (HIA), said that home purchase lending was likely to remain elevated thanks to a record number of high density dwellings reaching settlement.
“HIA expects that an orderly reduction in new dwelling commencements will become evident during 2017, particularly on the apartment side of the market. Accordingly, the volume of new home loans is only likely to start easing back towards the end of next year,” he said.
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